A government is concerned about the heating habits of the elderly when there is an increase in fuel prices. Its department of health had warned that people underestimate the amount of heating they need during a cold winter to remain in long term good health. To ensure that the heating habits of the elderly will not be affected by increases in fuel prices, the government proposes to compensate them in such an event. Accordingly, it will pay the elderly the difference between the higher price and the current price for the original level of consumption.

(a) Describe the initial choice of heating by an elderly individual;

(b) Analyse the effects of an increase in the cost of heating on the consumption of heating and the well-being of that individual before and after the implementation of government policy;