Chapter 55. Modeling Nonlinearities and Interactions

Questions answered in this chapter:

  • What does it mean when we say that an independent variable has a nonlinear effect on a dependent variable?

  • What does it mean when we say that the effects of two independent variables on a dependent variable interact?

  • How can I test for the presence of nonlinearity and interaction in a regression?

Answers to This Chapter’s Questions

What does it mean when we say that an independent variable has a nonlinear effect on a dependent variable?

An independent variable often influences a dependent variable through a nonlinear relationship. For example, if you try to predict product sales using an equation such as Sales=500–10*Price, price influences sales linearly. This ...

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