One of the agricultural policy goals in Ethiopia is to arrest the declining tend in dairy production. The response of the Ethiopia Government to these concerns has been the promotion of the crossbreeding of exotic cows with indigenous zebu cows. A question for policy makers is whether such intervention is reversing the trend and benefiting the rural people. This study examines its effects on changes in dairy production technology, prices of outputs and lab our on consumption and intra-house hold lab our allocation. A farm household model is the analytical frame work used to generate predictions about the responses of farm households based on comprehensive data collected from 60 households. The result of the analysis predicts a high scope for the government output price and technological intervention policy to affect consumption. However, lab our allocation is not likely to bee affected by prices, but is likely to be affected by a change in technology.