Cycling – good for you and good for the economy

A report from Cycling England has suggested that a £70m investment in cycling each year could save the government £520m per year. The savings result from the positive benefits of increased cycling – lower carbon dioxide emissions and lower NHS costs as we become healthier. But, do the numbers add up?

Investment in cycling could save £520m, government told Guardian (17/9/07)


1. Define the terms (i) external benefits (ii) external costs and (iii) marginal social benefit.
2. Identify three external benefits that result from increased cycling.
3. Using diagrams as appropriate, show how the market equilibrium and the socially optimum level of cycling will differ.
4. Discuss policies that the government could adopt to move the market closer to the social optimum.