This research aimed at understanding the effect of changing
tea prices on welfare of smallholders in Kenya. A total of 60 tea farmers
were interviewed. After data collection and preliminary analysis, multivariate
cluster analysis was done to classify the families into two groups. Based
on findings of statistical analysis of resources and living standards
of the families, a strategy of changing the tea prices was formulated.
Raising the prices of tea was hypothesized to increase family income.
Ten year dynamic models were applied to measure the impact of this strategy
on family income. Two types of data were used. The first set was averages
from statistical analysis of survey data and the second set of data was
prices of tea for a period of 12 years obtained from the local tea factory.
Analysis of these prices indicated fluctuation and since the main objective
was to test the impact of fluctuation on family income, future random
prices were created using the 12 years prices. Optimal family income was
first calculated using tea prices obtained from the survey and later recalculated
using random prices. Results indicated that fluctuation in tea prices
has low effect on stability of family income among the tea smallholders
in the survey region.