Linear response models
Building Response Models in R
Kathrin Gruber
Assistant Professor of Econometrics Erasmus University Rotterdam
Model elements
Linear response function
$$\textsf{SALES} = f(\textsf{PRICE})$$
Building a linear response model for sales
linear.model <- lm(SALES ~ PRICE , data = sales.data)
coef(linear.model)
(Intercept) PRICE
274.2486 -134.3097
Making predictions
coef(linear.model)[1] + 0.95 * coef(linear.model)[2]
146.6544
coef(linear.model)[1] + 1.05 * coef(linear.model)[2]
133.2234
Predictive performance
plot(SALES ~ PRICE, data = sales.data)
abline(linear.model)
