Final answer:
An increase in the price of indoor cycling classes may lead to an increased demand for other fitness classes due to their substitutability. Economic principles dictate that demand for substitutes increases as prices rise for a related good. This differs from inelastic products such as necessities, which are less affected by price changes.
Step-by-step explanation:
If the price of indoor cycling classes increases by $10, we would expect the demand for other fitness classes to potentially increase. This change in demand is because indoor cycling classes and other fitness classes can be considered substitute goods in many cases. Substitute goods are products or services that can replace each other when they become too expensive or unavailable. Consumers may look for alternative ways to engage in their fitness routines, thus possibly migrating to different forms of fitness classes that have not increased in price.
In economic terms, when the price of a good increases, the demand for its close substitutes can rise because consumers look for more cost-effective alternatives. For instance, considering the financial scenarios of the Yoga Center, fixed costs such as rent remain unchanged irrespective of operation status. However, the variable costs, such as hiring instructors (marginal costs), will cease if the center shuts down, impacting overall revenue and profitability.
Using these principles, we can analyze consumer behavior in various industries. For example, necessities like housing have an inelastic demand, meaning price changes do not significantly influence demand. However, price-sensitive goods, those considered non-essential, have more elastic demand curves, where prices have a greater effect on the quantity demanded.