UNIT SIX

An Initial Look at Demand

What do We Mean by Demand?
The Law of Demand
Elasticity of Demand

ESSENTIAL VOCABULARY
1. Cut n – the act of reducing the amount, number or rate of something – скорочення, зниження,
зменшення. Cut in sales – зменшення товарообороту, cut/decreased/reduced price – знижена
ціна, price cut/cut in price - зниження ціни. Syn. a reduction, a decrease, a decline, a fall.
2. Demand (for something) n – the act of demanding or requesting something forcefully –
попит, потреба, вимога. Actual demand – фактичний/дійсний попит, change/increase/
decrease in demand – зміна/збільшення/зменшення попиту, consumer/consumptive/customer
demand – споживчий попит, decreased/increased demand – зменшений/збільшений попит,
great/high/enormous/strong demand – великий попит. To be in (good/great) demand –
користуватися (великим) попитом, to meet/satisfy/supply a demand – задовольняти
потребу, to meet/satisfy/supply the demand – задовольнити/задовольняти попит.
3. Demand v - to request something clearly and firmly in a way that is difficult to ignore or deny –
вимагати, потребувати. Syn. to call for, to require.
4. Diminish v – to make something smaller or less important, or become smaller or less important
– зменшувати(ся), скорочувати(ся). Diminishing marginal utility – гранична спадна
корисність. Syn. to decline, to decrease, to lessen.
5. Discourage v. – to make someone feel less confident, enthusiastic and positive about
something, or less willing to do something – знеохочувати, відбивати охоту; розхолоджувати;
відмовляти; відраджувати, перешкоджати, заважати, стримувати.
6. Item n – a single thing in a list, group or collection of things – виріб, товар, вид товару. Syn.
an article, a thing.
7. Necessity n – something that a person needs, especially in order to live – необхідність,
потреба, предмет першої необхідності. Syn. a need.
8. Necessities n – things needed to support life – предмети/товари першої необхідності. Basic
necessities – предмети/товари першої необхідності. Syn. essential goods, essentials.
9. Quantity n – an amount or number of something especially that can be measured or is fixed –
кількість, розмір, величина. Price-quantity combination – комбінація/поєднання ціни та
кількості, quantity demanded – величина попиту, quantity supplied – величина пропозиції.
10. Respond to v - to act or do something in return to a force or stimulus – реагувати, робити
щось у відповідь. To respond to the demand - задовольнити попит. Syn. to react to.
11. Shift v – to change place, position or direction – переміщувати. To shift to the left/to the
right – переміщуватись вліво/вправо.
12. Slope v – to take an inclined course – нахилятися, мати нахил. To slope down/downward –
опускатися полого, to slope up/upward – підніматися полого.
13. Substitute something for something – to use something instead of another thing –
замінювати щось чимось.

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14. Suffer v – to experience or undergo something unpleasant or undesirable – зазнавати,
потерпати. To suffer a cut/decrease in sales – зазнавати зменшення обсягу продажу/
товарообороту, to suffer losses – зазнавати збитків. Syn. to incur, to sustain.
15. Tend v – to be generally inclined to react or behave in a particular way, or be in the habit of
doing something – мати схильність (тенденцію), бути схильним, тяжіти. Syn. to be apt.
16. Usefulness n. – a quality of having utility and especially practical worth or applicability –
корисність. Item’s usefulness – корисність товару. Syn. utility.
17. Vary v. – to change within a range of possibilities, or in connection with something else –
міняти(ся), змінювати(ся), варіювати. To vary inversely/directly with – змінюватися
обернено/прямо пропорційно до.

TEXT
The theory of supply and demand is perhaps one of the most fundamental concepts of economics
and it is the backbone of a market economy. The supply and demand model describes how prices
vary as a result of a balance between product availability and consumer demand.
Since contemporary economies rely on the market forces of supply and demand instead of
government forces to distribute goods and services there must be a method for determining who
gets the products that are produced. This is where the laws of supply and demand begin to work. By
themselves these laws give us basic information, but when working together they are the key to
distribution in a market economy.
It is not enough for a buyer to want or desire an item. He or she must show the ability to pay and
then the willingness to pay. In economics, demand is comprised of people’s desire, willingness and
ability to purchase particular amounts of goods or services at certain prices in a given period of
time. To the economists consumers make rational choices about how much to buy and how to spend
their income on the products that will give them the greatest satisfaction at the least cost. So,
demand describes the behavior of buyers.
What factors alter a consumer’s desire, willingness and ability to pay for products? Some factors
include consumers’ income and tastes, the prices and availability of related products like substitutes
or complementary goods, and the item’s usefulness.
Substitutes are goods that satisfy similar needs and which are normally consumed in place of each
other. As the price of one substitute declines, demand for the other substitute will decrease. Butter
and margarine are close substitutes. If the price of butter goes up, then people will be apt to
substitute margarine for butter.
Complementary goods are those that are normally consumed together (e.g., DVD players and DVD
movies). An increase in the price of a product will diminish demand for its complement while a
decrease in the price of a product will increase demand for its complement.
Think of the item’s usefulness this way. It is a hot summer day and you are gasping for a drink*.
You come across a lemonade stand and gulp down a glass*. It tasted great so you want another.
This second glass is marginal utility meaning an extra satisfaction a consumer gets by purchasing
one more unit of a product. But now you reach for a third glass. Suddenly your stomach is bloated
and you are feeling sick. That means that the law of diminishing marginal utility comes into effect!
The law of demand states that the higher the price of a product, the fewer people will demand that
product, that is, demand for a product varies inversely with its price, all other factors remaining
equal*. Factors other than a good’s price which affect the amount consumers are willing to buy are

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called the non-price determinants of demand. The law of demand expresses the relationship
between prices and the quantity of goods and services that would be purchased at each and every
price. In other words, the higher the price of a product, the lower the quantity demanded.
Economists like to look at things graphically. A demand schedule is a table showing the number of
units of a product that would be purchased at various prices during a given period of time. The
information presented in a graphic form is called a demand curve. It shows an inverse relationship
between the price and the quantity demanded. Or to put it another way, the demand curve represents
the quantities of a product or service which consumers are willing and able to buy at various prices,
all non-price factors being equal. The demand curve slopes downward from left to right based on
the law of demand.
The advantage of the curve is that it enables economists to see the relation between price and
quantity demanded and to calculate approximately what the demand would be for those prices
falling in between the prices that are in the demand schedule. Each point along the curve represents
a different price-quantity combination.

Demand schedule for cut jeans

Price The quantity demanded
$400 200
$350 500
$300 800
$225 1200
$175 1600
$100 2400
$50 3000

Demand curve for cut jeans

450

400

350

300

250
Price

200

150

100

50

0
0 500 1000 1500 2000 2500 3000 3500
Quantity

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Since the quantity demanded is greater at a lower price the demand curve shifts to the right. On the
other hand, decreased demand causes the curve to shift to the left because at a higher price the
quantity demanded is less.
The key point is to distinguish between demand and the quantity demanded.
 Demand refers to how much of a product or service is desired by buyers.
 The quantity demanded is the amount of a product that people are willing to buy at a
certain price.
The difference is subtle but important. If the demand of ice cream goes up in summer it is because
consumptive demand has truly increased, clearly it is hot. In this case the business can most likely
raise prices without suffering a cut in sales. This is a change in the quantity demanded. In winter the
business incurs a sales fall at the same price. The only way out of increasing sales is to reduce the
price. As a result of a cut in price the increased sales of ice cream means that consumer demand has
artificially been manipulated. In reality, actual demand is low but extra efforts have to be made to
increase sales. This leads to a change in demand.
Economists distinguish two different ways that the quantity of purchases of a product can change.
 According to the law of demand a change in price results in a change in the quantity
demanded, that is, more will be purchased but only at a lower price. Thus, the only thing that
can change the quantity demanded is a change in the market price, all the non-price
determinants remaining the same.
 When one of the non-price factors changes there will be a change in demand, the good’s price
being equal.
All of the non-price determinants (changes in the size of the market, income of the average
consumer, population size, the prices and availability of related goods, consumer preferences) are
directly related to consumers. In other words, at any given price, consumers will be willing and
able to purchase either more or less of a product that depends on its price.
To understand better the theory of supply and demand it is necessary to know how much buyers and
sellers respond to price changes. This responsiveness is called elasticity.
Elasticity varies among products because some products may be more essential to the consumer. A
good or service is considered to be highly elastic if a slight change in price leads to a sharp change
in the quantity demanded. A price increase of a product or service that isn’t considered a necessity
will discourage more consumers to buy this product or service. On the other hand, an inelastic good
or service is one in which changes in price bring about only modest changes in the quantity
demanded, if any at all. Products that are necessities are more insensitive to price changes because
consumers will continue buying these products despite a price rise. It is known as the price
elasticity of demand.
In economics, the price elasticity of demand is an elasticity that measures the nature and degree of
the relationship between changes in the quantity demanded of a commodity and changes in its price.
One typical application of the concept of elasticity is to consider what happens to customer
demand for a product when prices increase. As the price of a product rises, consumers will usually
demand less of that product, perhaps by consuming less, substituting another product for it, and so
on. The greater the extent to which demand falls as price rises, the greater the price elasticity of
demand is.
Demand is called elastic if a small change in price has a relatively large effect on the quantity
demanded.

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The number and quality of substitutes for a product are the basic influence on price elasticity of
demand. If the prices of substitutes remain the same, a rise in the product’s price will discourage
consumers from buying this product. On the other hand, if there is a price cut in the product,
consumers will substitute other items for this product. Thus, the demand for this product tends to
be elastic. In general, demand is elastic for non-essential commodities (visits to theatres or
concerts, holidays, parties, etc.)
However, there are some goods that consumers cannot consume less of, and cannot find a proper
substitute even if prices rise. Some essential goods that are relatively inexpensive and for which it is
difficult to find substitutes are said to have inelastic demand. To put it another way, a change in
price results in a relatively small effect on the quantity demanded.

COMMENTS:
to gasp for a drink – помирати від спраги;
to gulp down a glass – жадібно/квапливо проковтнути напій;
all other factors remaining equal – за умов, що усі інші фактори залишаються незмінними;

Exercise 1. Read, translate into Ukrainian in writing and memorize the following econ omic terms and
concepts.

1. Complementary goods: the two goods ___________________________________________

tend to be consumed or used together in ___________________________________________
relatively fixed or standardized ___________________________________________
proportions. ___________________________________________
2. Demand curve: the graphical ___________________________________________
representation of how demand for ___________________________________________
something varies in relation to its price. ___________________________________________
3. Demand schedule: a table showing the ___________________________________________
quantities of a product that would be ___________________________________________
purchased at various prices at a given ___________________________________________
time. ___________________________________________
4. Demand: the level of a consumer’s ___________________________________________
willingness, ability and desire or need that ___________________________________________
exist for particular goods or services. ___________________________________________
5. Elastic demand: Demand for which a ___________________________________________
small change in price results in a large ___________________________________________
change in demand. ___________________________________________
6. Elasticity: An economic concept which ___________________________________________
is concerned with a shift in either demand ___________________________________________
for or supply of an economic product as ___________________________________________
___________________________________________
the result of a change in a product’s price.
___________________________________________
7. Inelastic demand: Demand for which ___________________________________________
a large change in price leads to only a ___________________________________________
small change in demand. __________________________________________
8. Law of demand: the economic law ___________________________________________
that states that demand for a product ___________________________________________

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varies inversely with its price.
9. Law of diminishing marginal utility:
the economic law that states that for a
single consumer the marginal utility of a
commodity diminishes for each additional
unit of the commodity consumed.
10. Marginal utility: the additional
satisfaction a consumer gains from
consuming one more unit of a good or
service.
11. Price elasticity of demand: The
degree to which demand for a commodity
responds to a change in the price of this
commodity.
12. Substitute: a product or service
that partly satisfies the need of a consumer
that another product or service fulfills.
13. Utility: an economic term ___________________________________________
referring to the total satisfaction received ___________________________________________
from consuming a good or service.
___________________________________________
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Exercise 2. Give the Ukrainian equivalents for the following.

1. the most fundamental concepts ___________________________________________________
2. product availability _____________________________________________________________
3. to rely on the market forces of supply and demand ___________________________________
____________________________________________________________________________
4. the key to distribution ___________________________________________________________
5. in place of each other ___________________________________________________________
6. to substitute margarine for butter __________________________________________________
7. an extra satisfaction ____________________________________________________________
8. to describe the behavior of buyers _________________________________________________
9. factors other than a good’s price __________________________________________________
10. the number of units of a product __________________________________________________
11. all non-price factors being equal __________________________________________________
12. the key point is to distinguish ____________________________________________________
13. the demand was artificially manipulated ____________________________________________
14. demand at any given price _______________________________________________________
15. to be more essential to the consumer ______________________________________________
16. a sharp change in the quantity demanded ___________________________________________
17. to bring about only modest changes in the quantity demanded __________________________
_____________________________________________________________________________

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18. by substituting another product for it ______________________________________________
19. a rise in the product’s price ______________________________________________________
20. to find a proper substitute _______________________________________________________
21. the non-essential commodities ___________________________________________________

Exercise 3. Find the English equivalents for the following.

1. Основа ринкової економіка ____________________________________________________
2. готовність платити ___________________________________________________________
3. змінювати бажання споживача _________________________________________________
4. наявність спорідненої продукції ________________________________________________
5. близькі товари-замінники ______________________________________________________
6. зменшувати попит на його товар-супутник _______________________________________
____________________________________________________________________________
7. ще одна одиниця продукції ____________________________________________________
8. робити зважені вибори ________________________________________________________
9. нецінові визначники попиту ___________________________________________________
10. за будь-якою ціною ___________________________________________________________
11. обернено пропорційна залежність між ціною та величиною попиту __________________
____________________________________________________________________________
12. крива попиту опускається полого _______________________________________________
13. які знаходяться між цінами ____________________________________________________
14. комбінація ціни та кількості ___________________________________________________
15. не зазнаючи зменшення товарообороту/обсягу продажу ____________________________
____________________________________________________________________________
16. додаткові (особливі) зусилля ___________________________________________________
17. зміна ринкової ціни ___________________________________________________________
18. різнитися між товарами _______________________________________________________
19. незначна зміна ціни/в ціні _____________________________________________________
20. не вважатися товаром першої необхідності _______________________________________
21. сутність та рівень відносин ____________________________________________________

Exercise 4. Match these adjectives and nouns/noun phrases as they occur together in the text.
Translate the expressions they make into Ukrainian.
1. an inverse application
2. a different efforts
3. a key demand
4. the actual point
5. the extra relationship
6. a typical price-quantity combination

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Exercise 5. Match these nouns/noun phrases, prepositions (if necessary) and nouns/noun phrases
as they occur together in the text. Translate the expressions they make into Ukrainian.
1. the availability the basic influence
2. a change a product
3. a concept availability
4. the key a product
5. a product for distribution
6. the demand on rise
7. an income of related products
8. a price elasticity of demand to the demand curve
9. the number in the quantity demanded
10. a price units of a product
11. a shift elasticity
12. the substitutes the average consumer

Exercise 6. Match the verbs/verbal phrases, prepositions (if necessary) and nouns/noun phrases as
they occur together in the text. Translate the expressions they make into Ukrainian.
1. to be the market forces
purchased on
2. to be related to a certain price
3. to buy at a change in the quantity demanded
4. to increase in consumers
5. to raise each and every price
6. to rely sales
7. to result prices

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Exercise 7. Copy out from the texts the sentences containing the following words and word-
combinations and translate these sentences into Ukrainian.
1. consumer demand – ____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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________________________________________________________________________________
2. the key to distribution – _________________________________________________________
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3. will be apt to substitute – ________________________________________________________
________________________________________________________________________________
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4. to the economists – _____________________________________________________________
________________________________________________________________________________
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5. the non-price determinants – _____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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________________________________________________________________________________
________________________________________________________________________________
6. the demand curve represents – ____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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7. it enables economists – __________________________________________________________
________________________________________________________________________________
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8. but only at a lower price – _______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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9. will discourage more consumers – __________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
10. more insensitive to price changes – ________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
11. substituting another product for it – ________________________________________________
________________________________________________________________________________
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________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
12. essential goods – _______________________________________________________________
________________________________________________________________________________
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________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Exercise 8. Choose words and word-combinations that have the same or similar meaning to the
words listed below. More than one is possible.
1. основа (2) ____________________________________________________________________
2. споживчий попит (3) – _________________________________________________________
3. зниження (3) – ________________________________________________________________
4. задовольняти потребу (3) – _____________________________________________________
5. реагувати (2) – ________________________________________________________________
6. знижена ціна (3) – _____________________________________________________________

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7. зазнавати збитків (3) – _________________________________________________________
8. мати схильність (2) – __________________________________________________________
9. значна зміна (2) – _____________________________________________________________
10. задовольнити попит (3) – _______________________________________________________
11. вимагати (3) – ________________________________________________________________
12. зменшувати (3) – ______________________________________________________________
13. товар (3) – ___________________________________________________________________
14. потреба (2) – _________________________________________________________________
15. товари першої необхідності (3) – ________________________________________________
16. зниження ціни (3) – ___________________________________________________________
17. за різними цінами (2) __________________________________________________________
18. додаткове задоволення (2) – ____________________________________________________
19. помірна зміна (3) – ____________________________________________________________

an additional enjoyment an answer to meet a demand to request essential goods

to incur financial losses to decline to decrease a reply a price decrease
at various prices to ask for a foundation to call for to shift to the left
to shift outward to estimate essentials to modify a consumptive demand
a price reduction to require a keystone a decline a reduced price
basic necessities a thing a small change to lessen to sustain losses
a decreased price to alter to react to an article to meet the demand
a customer demand to be apt a large change a need a significant change
to satisfy a demand to count a slight change a fall to supply the demand

Exercise 9. Replace the words or word combinations in bold type with their synonyms.
1.When two goods satisfy similar needs a change in the price of one item will result in a shift in the
demand for a substitute.
2.Two goods are described as substitutes when a price cut of one good results in a fall in the
demand for the other.
3.If the price of one of the substitutes diminishes while the prices of other goods remain the same,
people tend to substitute the cheaper good for goods they would have bought otherwise.
4. If a change in price leads to a great change in quantity demanded, the product is said to have
elastic demand.
5. Demand curve slopes downward from left to right showing the quantity demanded for a
particular product at various prices.
6. If prices are high, the quantity demanded will diminish and if prices are low, the quantity
demanded will increase.
7. Diminishing marginal utility explains that after consuming a certain amount of a commodity a
person gains less and less satisfaction from each extra purchase of this commodity.
8. Demand is considered to be inelastic when a price change of a commodity leads to a modest
change in consumer demand.

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9. Demand for necessities is always inelastic.

Exercise 10. Translate the words in brackets into Ukrainian.

1. The law of (спадної граничної корисності) says that the greater the quantity of any good
consumed, (тим менша гранична корисність) derived from consuming (ще однієї одиниці) of the
same good.
2. (Шкала попиту) shows the quantity of a product that buyers would be willing and able to
purchase (за різними можливими цінами) in a given time, (за умови, що усі інші речі
залишаються однаковими).
3. (Крива попиту) is (графічне зображення) of the relationship between a price of a good and
the quantity of that good (яку потребують покупці).
4. The demand for one good can be affected by the price (інших споріднених товарів).
5. If any of the factors that cause (попит на товар) to increase or decrease, occur (величина
попиту) at any particular price (буде вищою або нижчою).
6. Change in demand results in a shift of the demand curve (наліво або направо in response to a
change (одного з нецінових факторів), the good's price remaining constant.
7. To the economists, (цінова еластичність попиту) is the degree to which the demand is affected
by a change (ціни товару).
8. The most important circumstance that (впливає на еластичність попиту) is (наявність взаємо
замінюваних товарів).

Exercise 11. Pair the halves of the sentences and write the completed sentences. Translate them
into Ukrainian.
1. The market forces of supply and demand a. the availability of substitutes.
attempt to describe, explain, and predict
2. Substitutes are goods for which an b. results from a change in the good’s price, all
increase in the price of one other factors remaining equal.
3. The law of demand explains a c. when the price of something that is relatively
relationship between the quantity of a inexpensive is increased or decreased.
good that people are willing and able to
buy,
4. A change in the quantity demanded is a d. increases the demand for the other.
change in the quantity of a good that
purchasers are willing and able to buy
that
5. A change in demand is a change in the e. the degree of changes in the quantity
quantity of a good that purchasers are demanded in response to changes in the market
willing and able to buy that price.
6. People are less apt to change their buying f.arises out of a change in any of the factors
habits other than the good’s price.
7. Complementary goods are goods for g. decreases the demand for the other.
which an increase in the price of one
8. A demand curve slopes downward from h. the price and quantity of goods bought and

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 left to right, representing the fact that
9. The most important circumstance that i. the non-price determinants being equal, and the
affects elasticity of demand is
10. Elasticity of demand indicates
Completed sentences
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sold within a market.
price of that good.
j. the quantity demanded varies inversely with
the price
Translation
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Exercise 12. Match each term in column A with its definition in column B.
A B
1. Complementary a. The table showing the quantities of a product that would be
goods purchased at various prices at a given time
2. Demand b. The extra utility or satisfaction derived by a consumer from the
consumption of the last unit of a commodity.
3. Demand curve c. The relationship between the quantities of a good or service that
consumers desire to purchase at each and every price that can exist
for the good or service at any particular time.
4. Demand schedule d. The graph representing the relationship between the price of a certain
commodity, and the amount of it that consumers are willing and able
to purchase at that given price.
5. Diminishing e. It refers to how supply and demand change in response to various
marginal utility influences.
6. Elastic demand f. A term used when the percentage change in quantity demanded is
smaller than the percentage change in price.
7. Elasticity g. The total satisfaction received from consuming a good or service.
8. Inelastic demand h. The amount of a good or service that consumers would purchase at a
particular price
9. Law of demand i. A measure of the responsiveness of a commodity’s quantity
demanded to changes in that commodity’s price.
10. Law of diminishing j. One of the basic rule in economics stating that, all other factors being
marginal utility equal, as the price of a good or service increases, consumer demand
for the good or service decreases, and vice versa.
11. Marginal utility k. A term used when the percentage change in a product's price causes a
larger percentage change in quantity demanded.
12. Price elasticity of l. The decrease in enjoyment with increased consumption.
demand
13. Quantity demanded m. One of the basic rule in economics stating that as a person increases
consumption of a product - while keeping consumption of other
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 products constant - there is a decline in the marginal utility that
person derives from consuming each extra unit of that product.
14. Substitute n. Goods that should be consumed with other goods
15. Utility o. Things that replace, or can be used in place of, something else.
1 2 3 4 5 6
Exercise 13. Translate the sentences into English using the active vocabulary.
1. Попит означає бажання мати
певний економічний продукт,
готовність та спроможність
заплатити за нього ринкову ціну.
2. Відповідно до закону попиту
люди купують менше товару
протягом даного періоду часу за
вищими цінами ніж за нижчими і,
навпаки, вони купують більше
товару за низькими цінами ніж за
високими.
3. Крива попиту – це графічне
зображення як шкали попиту, так і
закону попиту.
4. Крива попиту опускається
полого зліва направо, що означає,
що споживачі готові і спроможні
купити більшу кількість товарів за
відносно низькими цінами.
5. Величина попиту – це кількість,
за яку покупці готові та здатні
заплатити.
6. Закон спадної граничної
корисності стверджує, що чим
більше ви маєте якогось товару по
відношенню до інших товарів, тим
менше ви бажаєте і готові заплатити
ту ж саму ціну за додаткову
одиницю цього товару.
7. Поведінка попиту на товари та
послуги залежить від цін на ці
товари та послуги, кількості людей,
які можуть собі дозволити купити їх
за даною ціною або замінити їх на
інші, що коштують дешевше, та
ступенем задоволення споживачів
7 8 9 10 11 12 13 14 15
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цими товарами та послугами.
8. Зміни у попиті існують також у
випадках, коли відбуваються зміни
у факторах інших ніж ціна товару.
9. Якщо кількість споживачів на
ринку збільшиться, попит на наявну
продукцію зросте і крива попиту
переміститься направо.
10. Попит називається еластичним,
якщо невелика зміна ціни має
відносно великий вплив на
величину попиту.
11. Підвищення ціни на не вкрай
необхідні товари стримує
споживачів від їх покупки за
поточною ціною.
12. Попит на товари першої
необхідності завжди нееластичний,
тому що незважаючи на збільшення
або зменшення ціни, споживачі
купують цей виріб або через
відсутність замінників, або їх
погану якість.
13. Цінова еластичність попиту – це
відсоткова зміна величини попиту у
відповідь на відповідну відсоткову
зміну ціни.
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Exercise 14. Answer the following questions.

1. Why is the theory of supply and demand considered one of the most fundamental concepts of
economics?
2. What is demand?
3. What factors alter consumer demand?
4. What goods are considered to be related?
5. What goods are called substitutes?
6. What are complementary goods?
7. What is the item’s usefulness?
8. What does the law of diminishing marginal utility explain?
9. Why does demand describe the behavior of buyers?
10. What does the law of demand state?
11. What relationship does the law of demand describe?
12. What non-price factors are covered by the “all other factors remaining equal” clause in the law

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 of demand?
13. Why does the law of demand have an inverse relationship?
14. What does demand schedule show?
15. What is demand curve?
16. What does the demand curve represent?
17. Why do economists use such economic model as demand curve?
18. What causes the demand for an economic product to increase or decrease at each and every
price?
19. What is the difference between demand and quantity demanded?
20. What does a change in price lead to?
21. How does the price of goods or services affect the quantity that buyers demand?
22. How do factors other than a good’s price affect demand?
23. What is the difference between a change in quantity demanded and a change in demand?
24. What is elasticity as an economic concept?
25. Why does elasticity vary among products?
26. Why does a price increase of a product discourage consumers to buy it?
27. When does a price change bring about only a slight change in the quantity demanded?
28. When does a price change cause a sharp change in the quantity demanded?
29. What goods are called necessities?
30. What does the price elasticity of demand mean?
31. What factors affect elasticity of demand?
32. What demand is considered as elastic?
33. What goods and services is demand elastic for?
34. When demand is said to be inelastic?
35. What is the difference between elastic and inelastic demand?
36. What goods and services is demand inelastic for?
37. Why is demand for necessities inelastic?

Questions for economic reasoning and discussion

1. Plot a demand curve according to a demand schedule given below and explain what a demand
curve for a hypothetic product shows.

Points Price Quantity demanded

(Hryvnias per unit of a product) (Units of a product per day)
A 5 5
B 4 10
C 3 20
D 2 30
E 1 40

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2. If you owned an ice cream shop at a seaside resort and additional ice cream shops are opening in
your area because of increasing prices, how would you take advantage of the use of substitute
products to compete more effectively? How would you make use of the concept of demand
elasticity in making decisions whether or not to raise prices for your specialty item such as shakes,
sundaes, and banana splits?
3. Discuss the process through which chicken has replaced beef as the leading meat item in
Ukraine. Has there been a shift in demand for beef or chicken or both?
4. Some people would buy more of a good (such as jewelry or furs) at a high price than at a low
price. This results in upward-sloping “demand” curve. Would such a curve an exception to the law
of demand? Explain.
5. What would happen to the market demand curve for steak as a result of each of the following:
a. An increase in the average level of income.
b. An increase in the number of families.
c. A successful advertising campaign for veal and pork.
d. An increase in the prices of veal and pork.
e. A decrease in the prices of veal and pork.

6. What would happen to the demand for Pepsi-Cola if the price of Coca-Cola were doubled? Why
would it happen?
7. Public transit systems often raise their rates to offset increased costs. Some of these systems
find that their total revenues decline in the first weeks after the rate increase and then rise. What
does this suggest about the elasticity of demand for these services?

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8. Assume you sell TVs. According to the concept of diminishing marginal utility, people with one
TV set would be less eager to purchase or rent a second and third set. How would you overcome
this sales resistance?
9. Below is a list of consumer goods and services. Determine whether an item has an elastic or
inelastic demand. Indicate the most important reason from the list below.
6-pack of cola Cheeseburger
Pizza Air conditioning
10-speed bicycle Electric guitar
Gasoline Apple juice
Cosmetic plastic surgery Automobile
Loaf of bread Surfer shirt
DVDs Steak

Reasons: necessity, luxury, many available substitutes, a few available substitutes, inexpensive,
expensive, easy to delay purchase, difficult to delay purchase.

10. Choose the right variant. Only one is possible.

1. Consider the price and demand for flower vases. The price of freshly cut flowers goes up
sharply. Which of the following would you expect to happen?
a. The demand curve for flower vases will shift to the left and their price will rise.
b. The demand curve for flower vases will shift to the left and their price will fall.
c. The demand curve for flower vases will shift to the right and their price will rise.
d. There will be a movement along the demand curve for flower vases and price will go down.
2. Which of the following would cause the demand curve for a good to shift to the left?
a. A rise in the price of the good.
b. A decrease in the tax imposed by the government on the good.
c. An increase in the supply of the good.
d. A decrease in the price of a substitute good.

3. According to the law of demand, when the price of a good increases,

a. people will choose to purchase less of that good and more of other.
b. people will provide more of that good.
c. people will choose to purchase more of that good and less of other.
d. people will provide less of that good.

4. What does the law of demand state?

a. As incomes increase, people consume more of all goods.
b. The demand for a good increases with the number of consumers in the market.
c. As the price of a good declines, consumers purchase more of that good.
d. The supply of a good increases in proportion to the demand for it.
5. Which of the following will move the demand curve for pork to the right?
a. A reduction in the cost of corn that is used to feed pigs
b. A reduction in the price of pork
c. An increase in the price of beef
d. All of the above

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6. Which of the following provides an example of complementary goods?
a. Pepsi and Coca-Cola
b. French fries and catsup (кетчуп)
c. Milk and orange juice
d. Beef and pork
7. The demand schedule is
a. a curve that shows the relationship between price and quantity demanded, all other factors
being the same.
b. a table that shows the relationship between price and quantity demanded, all other factors being
the same.
c. a list of time periods during which the quantity of a product is demanded.
d. the order in which individual consumers arrive to demand goods or services.
8. Which of the following would tend to have an inelastic demand curve?
a. Complementary goods
b. Luxuries
c. Goods with substitutes
d. Necessities
9. Which of the following best describes a product with elastic demand?
a. Consumers buy almost the same quantity of this product at a low price as they do at a high
price.
b. A relatively large price cut is necessary to convince consumers to buy a little more of this
product.
c. When the price of this product is reduced, consumers tend to buy more of it.
d. A relatively small price reduction will cause consumers to buy a lot more of this product.
10. The demand for a product tends to be elastic if
a. the product has a large number of good substitutes.
b. consumers generally spend a small fraction of their income on the product.
c. the product is regarded as a necessity.
d. the product has few good substitutes

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