Reference no: EM131482803
Question: In December of 2005, the Wall Street Journal reported that Clark Foam, a major supplier of polyurethane cores (blanks) for hand-shaped surfboards, closed its plant and went out of business (Peter Sanders and Stephanie Kang, "Wipeout for Key Player in Surfboard Industry," The Wall Street Journal, December 8, 2005, p. B1). Clark Foam was the Microsoft of surfboard blank makers, and had been supplying foam blanks to surf shops for over 50 years. Polyurethane blanks, while light and sturdy, contain a toxic chemical, toluene diisocyanate (TDI). Over the last two decades the Environmental Protection Agency has increasingly been restricting the use of TDI. Clark Foam's owner Gordon "Grubby" Clark indicated in a letter to customers that he was tired of fighting environmental regulators, lawsuits over injury to employees, and fire regulations. Surf historian and author of The Encyclopedia of Surfing, Matt Warshaw said, "It's the equivalent of removing lumber for the housing industry."
a. If you owned a retail surfboard shop and read this article in the Wall Street Journal, would you change the prices on the existing surfboards you have in the shop? Why or why not?
b. If the demand for surfboards remains constant over the next few years, what would you expect to see happen on the supply side in this industry?
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