Which appraisal principle indicates that excess profits in a market will lead to increased competition?

The principle of competition refers to the idea that when excess profits are available in a particular market, it attracts more participants or competitors who seek to capitalize on those profits. As new competitors enter the market, they often increase the supply of goods or services, which can lead to a balance in prices and profits. This principle is crucial in understanding how markets operate and adjust over time; when there is the potential for profit, more people will want to enter the market, which will ultimately affect overall market dynamics.

By focusing on the principle of competition, one recognizes that the presence of excess profits serves as a signal to potential business owners or investors that there is a lucrative opportunity to exploit. This influx of competition is beneficial for consumers, as it typically leads to more options and potentially lower prices.

In contrast, while supply and demand relate to market equilibrium and pricing, it does not specifically address how competition arises from excess profits. Market value deals with how much property is worth in terms of what buyers are willing to pay, and unique characteristics focus on distinctive features of properties. However, these principles do not capture the direct relationship between excess profits and increased competition in the same way that the principle of competition does.