Supply and demand in action in the heavy equipment industry

Heavy-Equipment Glut Weighs on Machine Makers
by: Bob Tita
Sep 19, 2016
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: Used machinery is flooding the secondhand market, piling more pain on equipment makers battling slack demand amid a global commodities slump.

CLASSROOM APPLICATION: Students can evaluate the decision by construction firms whether to purchase, rent, or lease machines. They can also evaluate the effect of an increased supply of used machines on the demand for, and equilibrium price of, new machines.

QUESTIONS: 
1. (Advanced) What is the effect of an increased supply of used machines on the demand for, and equilibrium price of, new machines?

2. (Advanced) What is the effect of a strong dollar on the amount of machinery sold abroad by U.S. manufacturers?

3. (Advanced) What is the effect of growth of the rental business on the supply of late-model machinery?

4. (Introductory) Why do manufacturers prefer to sell machinery than to lease it?

Reviewed By: James Dearden, Lehigh University