1. Discuss the policies that businesses might adopt to maintain sales when incomes are falling and consider which is most likely to be successful. 
One potential strategy adopted by a firm in a time of high inflation or recession, both of which would cause a fall in real incomes, in order to maintain sales revenue could be a decrease in the price of the product. This would be because a fall in income levels would cause all product to cost a higher proportion of the consumers’ incomes, thus becoming more significant purchases and, in turn, leading to a higher price elasticity of demand. As such, if, as the demand becomes more elastic, the value for its PED becomes higher than 1, the firm could serve to increase its sales revenue through a price decreases. This is because, due to the nature of the PED as a measure of the responsiveness of the quantity demanded in relation to changes in the price of a product, calculated through a division of the percentage change in the quantity demanded in relation to the percentage in the price of the product, if its value exceeds 1, then the increase in the quantity demanded wold be disproportionately higher than the fall in the price of the product, thus causing an increase in total revenue. Thus, through decreasing the price of their product in a period of falling real incomes, a firm could help maintain the same, or even higher levels of sales revenue.