1. Continuity at \( x = 1 \): \[ f(1^-) = \lim_{x \to 1^-} f(x) = (1)^2 + 1 = 2, \] \[ f(1^+) = \lim_{x \to 1^+} f(x) = 3 - 1 = 2. \] Thus, \( f(1^-) = f(1^+) = f(1) = 2 \), so \( f(x) \) is continuous at \( x = 1 \).
2. Differentiability at \( x = 1 \): Find the left-hand derivative: \[ f'(x) = \frac{d}{dx} (x^2 + 1) = 2x, \quad f'(1^-) = 2(1) = 2. \] Find the right-hand derivative: \[ f'(x) = \frac{d}{dx} (3 - x) = -1, \quad f'(1^+) = -1. \] Since \( f'(1^-) \neq f'(1^+) \), the function is not differentiable at \( x = 1 \).
Final Answer: \( \boxed{{Not differentiable at } x = 1} \)

A ladder of fixed length \( h \) is to be placed along the wall such that it is free to move along the height of the wall.
Based upon the above information, answer the following questions:
(iii) (b) If the foot of the ladder, whose length is 5 m, is being pulled towards the wall such that the rate of decrease of distance \( y \) is \( 2 \, \text{m/s} \), then at what rate is the height on the wall \( x \) increasing when the foot of the ladder is 3 m away from the wall?