Calculating distance with categorical predictors. this exercise with a tiny dataset illustrates the calculation of euclidean distance and the creation of binary dummies. (note that creating dummies is not required in certain software such as jmp, but it is useful to understand how they are derived and used).

the online education company statistics. com segments its customers and prospects into three main categories: it professionals (it), statisticians (stat), and other (other). it also tracks, for each customer, the number of years since first contact (years). consider the following customers; information about whether they have taken a course or not (the outcome to be predicted) is included:

customer 1: stat, 1 year, did not take course

customer 2: other, 1.1 year, took course

a. consider now the following new prospect:

prospect 1: it, 1 year

using the information given above on the two customers and one prospect, create one dataset for all three with the categorical predictor variable transformed into 2 dummy variables, and a similar dataset with the categorical predictor variable transformed into 3 dummy variables.