California Real Estate Practice Exam

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An over supply of condominiums built in a retirement area often results from ignoring which principle?

Substitution
Conformity
Contribution
Competition

The correct answer is: Competition

The over supply of condominiums built in a retirement area can be attributed to competition, as developers and investors may see the potential for profit in building in this area without considering the already existing supply. Option A, substitution, refers to the principle of supply and demand, and how a similar product or service may be used as a substitute for the desired one. Option B, conformity, refers to the principle of uniformity in terms of design and amenities, which may lead to a lack of diversity in the market. Option C, contribution, refers to the principle that the value of a property is determined by its contribution to the overall value of the neighborhood. Therefore, option D, competition, is the most relevant principle to consider in this scenario.