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Supply, Demand, And The Demise Of Clark Foam

955 words - 4 pages

This analysis discusses an article by Price & Luna (2005) in which they discuss the sudden December 5, 2005 closure of Clark Foam, the maker of over 90% of the world's foam core material for the manufacture of surfboards. The abrupt closure caused a massive economic trickle down effect on the entire global surfboard industry, affecting surfboard availability, demand, price, and jobs. The controversial reasons for the closure involved allegations by Gordon Clark, owner of Clark Foam, and the role played by various local, state, and federal government environmental agencies.In the early 1950s, Gordon Clark joined forces with Hobie Alter, designer of the Hobie Cat sailboat, to pioneer the ...view middle of the document...

However, several government agencies cited by Clark, including the Environmental Protection Agency, were quick to point out that they were not responsible for the Clark Foam closure. According to these government agencies, Clark was in full compliance with environmental requirements at his only factory that is located in California. However, the authors' further investigation found that the state of California was poised to announce a ban on the chemical Toluene di-Isocynate, a key ingredient in Clark's product.In an attempt to explain the situation so mainstream America could understand the gravity of Clark's decision, one local Californian surfboard maker likened the Clark Foam situation to the textile industry notifying all major clothes manufacturers that no more cotton was available. The effect on the surfboard manufacturing industry was immediate. Local surfboard craftsmen and larger assembly line type facilities faced immediate, critical financial decisions. With the supply of foam blanks now all but dried up, the first necessary reaction to this scarcity to hit consumers was the immediate price hike of all surfboards in inventory, new and used. Prices for surfboards worldwide soared 100%. With millions of surfers worldwide the demand for surfboards did not diminish, rather it increased as available inventory was scooped up because of the virtual monopoly Clark enjoyed on the industry. Used surfboards languishing in backyards were suddenly hot commercial property. This example is inverse to the normal, downward sloping economic demand curve. Obviously in this scenario all things were not constant. Even though surfboard prices went up, the demand increased at an alarming, reactionary rate. Conversely, the upward sloping standard economic supply curve was also upended. With prices skyrocketing, the non-constant "thing" that upended...

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