Which of the following best describes a categorical variable?

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Study for the University of Central Florida QMB3602 Business Research for Decision Making Exam 1. Prepare with detailed questions and in-depth explanations to excel in your test! Enhance your decision-making skills effectively.

A categorical variable is best described as a qualitative variable. Categorical variables are used to represent characteristics that can be divided into distinct groups or categories, which do not have a numerical interpretation. For example, a variable such as "color" or "type of cuisine" would be categorized into groups like "red," "blue," or "Italian," "Chinese," respectively.

The distinction between categorical variables and the other descriptions is significant. Numerical values, as mentioned in the first option, pertain to quantitative variables that can be measured and expressed numerically. The second option relates to discrete variables, which can be counted but do not capture the essence of categorical data. Finally, the last option refers to continuous variables that can take any value within a range or interval, which again does not align with the categorial nature of qualitative data.