I suspect that this and that do not directly correspond to their mooted Ukrainian equivalents (of course, I may be wrong). In Russian, for instance, то, although referenced commonly as the translation of "that" is in fact largely used only when there is also a "this" with which to contrast. This, of course, is quite different than the situation in English. I am curious if a similar lack of actual correspondence exists in Ukrainian.
You are right. What I meant was that without further context 'це' should, but not must, mean "this" (it is derived from OCS 'сь то' = lit. "this that"). By the way, the English "this"/"that" are merely two cases of the same Old English pronoun (cognate with Slavic 'то(т)'), so it is "causa perduta" to determine one-to-one correspondence between them and any two Slavic pronoun forms. Hence, if Duo gave your suggestion as wrong, you may report it.
Thanks (and for the interesting details)!
In English using "this" here strikes me as vaguely academic / formal. When it comes to understanding general concepts / ideas, I think "that" is pretty much the default in English. It sounds like це is the default in Ukrainian. Any guidelines as to when to when "Люди розуміють то" would instead be used?
If you add context, e.g. "Я розумiю це. Люди розумiють то", then it will be appropriate to use "то". But even without context, it won't sound horribly unnatural to use the 'т-' pronouns. I'm not 100% how it's Ukrainian or Russian, but in my native Bulgarian "той, та(я), то(е)" are simply the generic demonstrative pronouns. The true near vs distant pronouns are those derived from OCS "сь, са, со" = this one (here and now) and OCS "онъ, она, оно" = yonder one (over there and away from now). The first set can be translated interchangeably with both this/that, the next two compulsorily must be translated with this and respectively that ~ arch. yonder.