Containers P & Q have hot water, R has cold water and S has ice.
To show that water expands when heated - When water in the container Q is heated, it also heats up the water inside the conical flasks in Q. The water in conical flask thus expands and a rise in the level can be seen in the calibrated tube attached to the funnel (Image Q).
To show that water contracts when cooled - When water in container S is cooled, it contracts. Due to contraction the water in conical flask thus shows a fall in the level of water in the calibrated tube attached to the funnel. (Image S)
So, the right answer is Option B.