What causes an increase in both equilibrium price and quantity of watermelons?

An increase in both equilibrium price and quantity of watermelons occurs when there is heightened demand coupled with an adequate or less-than-adequate supply increase to meet that demand. In option C, the scenario describes a situation where both supply and demand increase, but the increase in demand outpaces the increase in supply.

When demand increases significantly, consumers are willing to purchase more watermelons at every price level. This creates upward pressure on the equilibrium price as consumers compete to buy the limited quantity available. At the same time, if supply also increases but not to the extent that it meets the new demand, the overall quantity in the market rises, yet the price also elevates due to the continued demand pressure.

This interaction leads to an increase in both the equilibrium price and equilibrium quantity of watermelons, leading to the situation described in option C. The imbalance between the growth in demand and supply is what ensures that both the price and quantity will rise in the market.