A machine became less valuable in the market due to new technology even though it still works. This is depreciation due to what?
Answer and explanation
Correct answer: Obsolescence
Obsolescence occurs when newer technology, improved designs, or better production methods make an existing asset less useful or less competitive. Physical wear is not necessary; a machine may still operate while its economic value falls. Normal wear and tear is a different cause of depreciation, whereas wages and tax collection are financial transactions and do not explain the machine’s loss of value.
Frequently asked questions
What is the correct answer to this question?
Obsolescence
Why is this the correct answer?
Obsolescence occurs when newer technology, improved designs, or better production methods make an existing asset less useful or less competitive. Physical wear is not necessary; a machine may still operate while its economic value falls. Normal wear and tear is a different cause of depreciation, whereas wages and tax collection are financial transactions and do not explain the machine’s loss of value.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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