Hope Hernandez,Marketing Manager of People's 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 Hope's regression model is ___.

Question

Quizplus · Accepted Answer

To include two qualitative variables in the regression model, we need to create dummy variables for each level of the two variables. For the first qualitative variable (pharmacy neighbourhood), we need to create two dummy variables (one for suburban and one for rural, with urban being the reference level). For the second qualitative variable (lighting level), we need to create two dummy variables (one for medium and one for bright, with soft being the reference level). Therefore, the total number of dummy variables needed is 2+2=4.