Partial budget analysis
For evaluation of farmers acceptance of "improved" methods (cultural practices, quality seed, storage methods, etc.) the partial budget analyses is used.
The budgets are called "partial" because they do not include all production costs and returns, but only those that change when the farmers' existing practices which are replaced by alternatives are being evaluated.
If an alternative technology results in higher profits than it increases costs, farmers may be interested in incorporating this technology in their production system.
The following variables are considered:
- change in variable costs: change VC
- change in total revenue: change TR
- change in net income: change NI = change TR - change VC
- rate of return: R = change NI / change VC
An example related to seed sprouting is given:
EXAMPLE: sprouting of seed