Q.Depreciation on a fixed asset is caused mainly by:

Depreciation is about the asset physically/economically ageing in the business's own hands, not about outside price movements.

Option (b) is correct. Depreciation is caused mainly by wear and tear — the physical deterioration an asset suffers through continuous use — reinforced by the efflux of time (relevant for leases and patents) and, for many modern assets, by obsolescence (technological ageing). Option (a), a fall in the asset's market price, is a separate phenomenon from accounting depreciation, which is based on cost allocation over useful life, not on market fluctuations. Option (c), a general rise in the price level, is a macroeconomic effect (inflation) that does not by itself cause an individual asset to wear out or lose usefulness. Option (d), a change in the tax rate, has no bearing on the physical or economic ageing of the asset itself.

Mixing up depreciation (a fall in an asset's book value due to use/time) with a fall in its market price, or with unrelated macroeconomic changes like inflation or tax rates.