The Number of Dummy Variables Representing a Qualitative Variable Should

question 51

Multiple Choice

The number of dummy variables representing a qualitative variable should be ________.

• A) one less than the number of categories of the variable
• B) two less than the number of categories of the variable
• C) the same number as the number of categories of the variable
• D) None of these choices is correct.

---

Definitions:

Equilibrium Price

The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers.

Consumer Surplus

The divergence between the total payment consumers are willing to make for a product or service and what they really pay.

Demand Increase

A situation where consumers are willing and able to purchase more of a product or service at each price level, often caused by changes in tastes, income, or prices of related goods.

Consumer Surplus

The separation in monetary terms between what consumers are willing to pay for a good or service and their final payment amount.