Evaluating Different Economic Policies on Exercise

Using the data and your economic knowledge, evaluate different economic policies that could be used to encourage schoolchildren to undertake more exercise. (25 marks) Exercise is a merit good, which means the government feels that people will under-consume. Exercise is socially desirable and is under provided as the market mechanism allocates fewer resources to the supply of exercise due to the positive externalities. In order to encourage the schoolchildren the possible policies that the government could increase the consumption of exercise would be to offer subsidies on exercise related products, provision of information about the benefits of exercising and the cash incentives.

Subsidies on exercise should lower the price and increase the consumption of the goods, therefore creating more positive externality hence more benefits to the society. However this could be a risk to the government directly as it can result in a government failure if the net social benefits are less than the cost of such an action. For example, the government could subsidies bicycles and swimming lessons but it is an opportunity cost as the government expenditure has been used on a particular sector when it could have been used to fund education or the NHS.

Provision of information is very important as it allows the children to understand the importance of exercising and living a healthier lifestyle. The government could organise workshops, camps, or even make physical education compulsory for schools. These types of events gets kids involved very quickly and encourage them to exercise as well as enjoy themselves. Workshops, Camps, Seminars allows the children to spend more time with their families and be healthy. This could be a great opportunity for parents or other adults to learn about being health and possibly improve their children’s and their way of living life.

Cash incentives is another good policy that the government can use to increase the number of people living a