The correct answer is: C. Physical depreciation.
Physical depreciation is the loss of value of an asset due to wear and tear, aging, or damage. It is the most common type of depreciation and is usually caused by the natural use of an asset.
Functional depreciation is the loss of value of an asset due to changes in technology or market conditions. It occurs when an asset becomes obsolete or less efficient than newer models.
Design depreciation is the loss of value of an asset due to flaws in its design. It can occur when an asset is not well-made or when it is not designed to withstand the rigors of its intended use.
Demand depreciation is the loss of value of an asset due to a decrease in demand for the asset. It can occur when the asset is no longer in fashion or when there is a glut of the asset on the market.
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