In addition to state-of-the-art technologies, the production of quality wine is strongly influenced by the natural endowments of the grape-growing region—called the “terroir.” The Economic Journal (May 2008) published an empirical study of the factors that yield a quality Bordeaux wine. A quantitative measure of wine quality (y) was modeled as a function of several qualitative independent variables, including grape-picking method (manual or automated), soil type (clay, gravel, or sand), and slope orientation (east, south, west, southeast, or southwest).

a. Create the appropriate dummy variables for each of the qualitative independent variables.

b. Write a model for wine quality (y) as a function of grape-picking method. Interpret the β’s in the model.

c. Write a model for wine quality (y) as a function of soil type. Interpret the β’s in the model.

d. Write a model for wine quality (y) as a function of slope orientation. Interpret the β’s in the model.