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.

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 economic terms and concepts.

Complementary goods: the two goods tend to be consumed or used together in relatively fixed or standardized proportions.	____________________________________________________________________________________________________________________________________________________________________
Demand curve: the graphical representation of how demand for something varies in relation to its price.	____________________________________________________________________________________________________________________________________________________________________
Demand schedule: a table showing the quantities of a product that would be purchased at various prices at a given time.	____________________________________________________________________________________________________________________________________________________________________
Demand: the level of a consumer’s willingness, ability and desire or need that exist for particular goods or services.	____________________________________________________________________________________________________________________________________________________________________
Elastic demand: Demand for which a small change in price results in a large change in demand.	___________________________________________________________________________________________________________________________
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.	_____________________________________________________________________________________________________________________________________________________________________________________________________________
Inelastic demand: Demand for which a large change in price leads to only a small change in demand.	___________________________________________________________________________________________________________________________
Law of demand: the economic law that states that demand for a product varies inversely with its price.	___________________________________________________________________________________________________________________________
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.	______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Marginal utility: the additional satisfaction a consumer gains from consuming one more unit of a good or service.	____________________________________________________________________________________________________________________________________________________________________
Price elasticity of demand: The degree to which demand for a commodity responds to a change in the price of this commodity.	____________________________________________________________________________________________________________________________________________________________________
Substitute: a product or service that partly satisfies the need of a consumer that another product or service fulfills.	____________________________________________________________________________________________________________________________________________________________________
Utility: an economic term referring to the total satisfaction received from consuming a good or service.	____________________________________________________________________________________________________________________________________________________________________

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. in place of each other _______________________________________________________

5. to substitute margarine for butter ______________________________________________

6. an extra satisfaction _________________________________________________________

7. to describe the behavior of buyers _____________________________________________

8. factors other than a good’s price _______________________________________________

9. the number of units of a product ______________________________________________

10. all non-price factors being equal ______________________________________________

11. the key point is to distinguish ________________________________________________

12. the demand was artificially manipulated ________________________________________

13. demand at any given price ___________________________________________________

14. to be more essential to the consumer ___________________________________________

15. a sharp change in the quantity demanded _______________________________________

16. to bring about only modest changes in the quantity demanded _______________________

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17. by substituting another product for it ___________________________________________

18. a rise in the product’s price __________________________________________________

19. to find a proper substitute ___________________________________________________

20. 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. не зазнаючи зменшення товарообороту/обсягу продажу ________________________ ________________________________________________________________________

15. додаткові (особливі) зусилля _______________________________________________

16. зміна ринкової ціни _______________________________________________________

17. різнитися між товарами ___________________________________________________

18. незначна зміна ціни/в ціні __________________________________________________

19. не вважатися товаром першої необхідності ___________________________________

Exercise 4. 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.

the availability	for on of to in	the basic influence
a change		a product
a concept		the average consumer
the key		a product
the substitutes		distribution
the demand		rise
an income		related products
a price elasticity of demand		the demand curve
the number		the quantity demanded
a price		units of a product
a shift		elasticity

Exercise 5. 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.

to be purchased	on to at in	the market forces
to be related		a certain price
to buy		a change in the quantity demanded
to increase		consumers
to raise		each and every price
to rely		sales
to result		prices

Exercise 6. Copy out from the texts the sentences containing the following words and word-combinations and translate these sentences into Ukrainian.

1. consumer demand – ________________________________________________________ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

2. the key to distribution – _____________________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

3. will be apt to substitute – ____________________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________

4. to the economists – ________________________________________________________

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5. the non-price determinants – __________________________________________________

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6. the demand curve represents – ________________________________________________ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

7. it enables economists – ______________________________________________________

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8. but only at a lower price – ____________________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

9. will discourage more consumers – ______________________________________________ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

10. more insensitive to price changes – ____________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

11. substituting another product for it – ____________________________________________ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

12. essential goods – ___________________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Exercise 7. Choose words and word-combinations that have the same or similar meaning to the words listed below. More than one is possible.

1. додаткове задоволення (2) – ________________________________________________

2. за різними цінами (2) ______________________________________________________

3. задовольнити попит (3) – ___________________________________________________

4. зазнавати збитків (3) – _____________________________________________________

5. зменшувати (3) – __________________________________________________________

6. значна зміна (2) – _________________________________________________________

7. знижена ціна (2) – _________________________________________________________

8. зниження ціни (3) – ________________________________________________________

9. мати схильність (2) – ______________________________________________________

10. помірна зміна (2) – ________________________________________________________

11. реагувати (2) – ____________________________________________________________

12. споживчий попит (2) – _____________________________________________________

13. товар (3) – ________________________________________________________________

14. товари першої необхідності (3) – ____________________________________________

essential goods	an item	to suffer losses	a significant change
a price decrease	to decline	to decrease	to incur losses
at various prices	to tend	a slight change	to supply the demand
an extra satisfaction	an article	to react to	a consumptive demand
a price reduction	essentials	a small change	a reduced price
basic necessities	a thing	to be apt	to sustain losses
a decreased price	to respond	a large change	to meet the demand
a customer demand	to respond to the demand	at each and every price	an additional enjoyment
a cut in price			to diminish

Exercise 8. 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 leads to 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 decline 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. 9. Demand for necessities is always inelastic.

Exercise 9. 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 10. Pair the halves of the sentences and write the completed sentences. Translate them into Ukrainian.

	The market forces of supply and demand attempt to describe, explain, and predict		the availability of substitutes.
	Substitutes are goods for which an increase in the price of one		results from a change in the good’s price, all other factors remaining equal.
	The law of demand explains a relationship between the quantity of a good that people are willing and able to buy,		when the price of something that is relatively inexpensive is increased or decreased.
	A change in the quantity demanded is a change in the quantity of a good that purchasers are willing and able to buy that		increases the demand for the other.
	A change in demand is a change in the quantity of a good that purchasers are willing and able to buy that		the degree of changes in the quantity demanded in response to changes in the market price.
	People are less apt to change their buying habits		arises out of a change in any of the factors other than the good’s price.
	Complementary goods are goods for which an increase in the price of one		decreases the demand for the other.
	A demand curve slopes downward from left to right, representing the fact that		the price and quantity of goods bought and sold within a market.
	The most important circumstance that affects elasticity of demand is		the non-price determinants being equal, and the price of that good.
	Elasticity of demand indicates		the quantity demanded varies inversely with the price
Completed sentences		Translation
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Exercise 11. Match each term in column A with its definition in column B.

A	B
Complementary goods	The table showing the quantities of a product that would be purchased at various prices at a given time
Demand	The extra utility or satisfaction derived by a consumer from the consumption of the last unit of a commodity.
Demand curve	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.
Demand schedule	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.
Diminishing marginal utility	It refers to how supply and demand change in response to various influences.
Elastic demand	A term used when the percentage change in quantity demanded is smaller than the percentage change in price.
Elasticity	The total satisfaction received from consuming a good or service.
Inelastic demand	The amount of a good or service that consumers would purchase at a particular price
Law of demand	A measure of the responsiveness of a commodity’s quantity demanded to changes in that commodity’s price.
Law of diminishing marginal utility	One of the basic rule in economics stating that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service decreases, and vice versa.
Marginal utility	The decrease in enjoyment with increased consumption.
Price elasticity of demand	A term used when the percentage change in a product's price causes a larger percentage change in quantity demanded.
Quantity demanded	One of the basic rule in economics stating that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each extra unit of that product.
Substitute	Goods that should be consumed with other goods
Utility	Things that replace, or can be used in place of, something else.

1	2	3	4	5	6	7	8	9	10	11	12	13	14	15

Exercise 12. Translate the sentences into English using the active vocabulary.

Попит означає бажання мати певний економічний продукт, готовність та спроможність заплатити за нього ринкову ціну. 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. Крива попиту – це графічне зображення як шкали попиту, так і закону попиту. Крива попиту опускається полого зліва направо, що означає, що споживачі готові і спроможні купити більшу кількість товарів за відносно низькими цінами. Величина попиту – це кількість, за яку покупці готові та здатні заплатити. 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. 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 цими товарами та послугами. Зміни у попиті існують також у випадках, коли відбуваються зміни у факторах інших ніж ціна товару. Якщо кількість споживачів на ринку збільшиться, попит на наявну продукцію зросте і крива попиту переміститься направо. Попит називається еластичним, якщо невелика зміна ціни має відносно великий вплив на величину попиту. Підвищення ціни на не вкрай необхідні товари стримує споживачів від їх покупки за поточною ціною. Попит на товари першої необхідності завжди нееластич-ний, тому що незважаючи на збільшення або зменшення ціни, споживачі купують цей виріб або через відсутність замінників, або їх погану якість.

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Exercise 13. 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. What does the law of demand state? 10. What relationship does the law of demand describe? 11. What non-price factors are covered by the “all other factors remaining equal” clause in the law of demand? 12. Why does the law of demand have an inverse relationship? 13. What does demand schedule show? 14. What is demand curve? 15. What does the demand curve represent? 16. What causes the demand for an economic product to increase or decrease at each and every price? 17. What is the difference between demand and quantity demanded? 18. What does a change in price lead to? 19. How does the price of goods or services affect the quantity that buyers demand? 20. How do factors other than a good’s price affect demand? 21. What is elasticity as an economic concept? 22. Why does elasticity vary among products? 23. Why does a price increase of a product discourage consumers to buy it? 24. When does a price change bring about only a slight change in the quantity demanded? 25. When does a price change cause a sharp change in the quantity demanded? 26. What goods are called necessities? 27. What does the price elasticity of demand mean? 28. What factors affect elasticity of demand? 29. What demand is considered as elastic? 30. What goods and services is demand elastic for? 31. When demand is said to be inelastic? 32. What goods and services is demand inelastic for? 33. Why is demand for necessities inelastic?