选C.
With the development of agriculture是状语,可以暂时忽略.
在the people in which village I taught before have lived a happy life.中
主句是the people have lived a happy life.
从句是I taught in the people's villiage.
先行词为the people,既然是先行词了,当然就是修饰它的了.
villiage 和 people有从属关系,用whose而不用which
同时状语in不能省.
综上,C.