When an asset suffers economic depreciation, what is the primary reason for its decreased value?

Economic depreciation primarily occurs due to physical deterioration, which refers to the wear and tear that an asset experiences over time as it is used. This deterioration affects the asset's functionality and aesthetic appeal, leading to a decrease in its market value. Physical factors, such as corrosion, structural damage, and outdated technology, collectively contribute to this decline.

While other factors like market speculation and increased maintenance costs may influence an asset's value, the core reason behind economic depreciation is fundamentally linked to its physical state. Increased demand typically drives up an asset's value, contrary to depreciation. Thus, the emphasis on physical deterioration correctly identifies the main cause of decreased value in an asset facing economic depreciation.