Economics Definition of Depreciation

A home can depreciate if the neighborhood it resides in becomes less desirable.

Depreciation is the opposite of appreciation and differs from depression in economic terms. When an object depreciates, it loses its value relative to its previous worth.

Definition

The definition of depreciation in the context of economics is a "decline in the value of a property due to indirect changes, such as, decline in the quality of neighborhood or the construction or closure of roads in the vicinity," according to BusinessDictionary.com.

What is Depression?

Depression is a term that refers to the economy as a whole. Typically a depression is defined as Gross Domestic Profit (GDP) declining two consecutive quarters.

How is Depreciation Different than Depression?

When the economy is in a depression, it does not inherently mean that all properties will depreciate. Depreciation refers to a specific item becoming less valuable, which can happen in any economic climate.

What is Appreciation?

Appreciation is the opposite of depreciation, it occurs when an object gains in value relative to its previous worth. Similar to depreciation, this is an effect that can occur in any economic climate.

Causes of Depreciation

Depreciation can be caused by a nearly limitless array of factors, but supply and demand have a heavy effect on the worth of a property. As the demand for an object is no longer able to keep pace with the supply that property may begin to lose value.

References

• Business Dictionary: Definitions
• Economist: Depression