  We present an implementation of the linear density response function within
the projector-augmented wave (PAW) method with applications to the linear
optical and dielectric properties of both solids, surfaces, and interfaces. The
response function is represented in plane waves while the single-particle
eigenstates can be expanded on a real space grid or in atomic orbital basis for
increased efficiency. The exchange-correlation kernel is treated at the level
of the adiabatic local density approximation (ALDA) and crystal local field
effects are included. The calculated static and dynamical dielectric functions
of Si, C, SiC, AlP and GaAs compare well with previous calculations. While
optical properties of semiconductors, in particular excitonic effects, are
generally not well described by ALDA, we obtain excellent agreement with
experiments for the surface loss function of the Mg(0001) surface with plasmon
energies deviating by less than 0.2 eV. Finally, we apply the method to study
the influence of substrates on the plasmon excitations in graphene. On
SiC(0001), the long wavelength $\pi$ plasmons are significantly damped although
their energies remain almost unaltered. On Al(111) the $\pi$ plasmon is
completely quenched due to the coupling to the metal surface plasmon.
