Hope Williams, Marketing Manager of RightAid Pharmacy, Inc., wants a regression model to predict sales in the greeting card department.Her data set includes two qualitative variables: the pharmacy neighbourhood (urban, suburban, and rural), and lighting level in the greeting card department (soft, medium, and bright).The number of dummy variables needed for "lighting level" in Hope's regression model is ___.
A)1
B)2
C)3
D)4
E)5

Question

Quizplus · Accepted Answer

To include the lighting level variable in the regression model, we need to create dummy variables. Since there are three levels of lighting (soft, medium, and bright), we need to create two dummy variables to account for all three levels. The first dummy variable will represent whether the lighting is medium or not, and the second dummy variable will represent whether the lighting is bright or not. Therefore, we need two dummy variables, which is option B.