He is a potter, making pots with the help of his family members. He sells pots in the nearby local market, or sometimes he gives them away for barter. What type of industry is he engaged in?

Cottage Industry

The correct answer is Option (2) → Cottage Industry

• A cottage industry is a small-scale industry carried out by artisans using traditional methods, usually at home with the help of family members. The potter making pots with family help and selling them in the local market (or bartering) fits this definition.

"HOUSEHOLD INDUSTRIES OR COTTAGE INDUSTRY :  It is the smallest manufacturing unit. The artisans use local raw materials and simple tools to produce everyday goods in their homes with the help of their family members or part time labour. Finished products may be for consumption in the same household or, for sale in local (village) markets, or, for barter. Capital and transportation do not wield much influence as this type of manufacturing has low commercial significance and most of the tools are devised locally". Some common everyday products produced in this sector of manufacturing include foodstuffs, fabrics, mats, containers, tools, furniture, shoes, and figurines from wood lot and forest, shoes, thongs and other articles from leather; pottery and bricks from clays and stones. Goldsmiths make jewellery of gold, silver and bronze. Some artefacts and crafts are made out of bamboo, wood obtained locally from the forests.".