Microsoft® Office Excel® 2007: Data Analysis and Business Modeling, Second Edition

Chapter 49. Modeling Nonlinearities and Interactions

• 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?

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

• An independent variable will often influence a dependent variable through a nonlinear relationship. For example, if we try to predict product sales using an equation such as Sales=500–10*Price, price influences sales linearly. This equation indicates that a unit increase in price will (at any price ...