It's a pretty big deal, getting the prices right. You want to be able to make a profit otherwise you might as well go back to giving it away. You want to be competitive with other artisans and crafters, too.
Do not sell your stuff cheaply! It, and you, are worth more than that. Undervaluing your items hurts you in the long run, but it also hurts the handmade marketplace. That being said, there is also a limit of what your regional market will bear. Yes, you have to take your customer type into consideration when pricing your items, but that doesn't mean selling an item for less, sometimes it means revamping your line to fit your customer base (i.e. making less expensive pieces for the church bazaar vs. the high end ones you make for the gallery).
You have to remember, this is now a business. Even if you are just a hobbyist, you are going to need to keep records of your supplies and what you paid for them. You are going to need to know how long it takes you to make a piece (including design time). You need to decide what your time it worth. Imagine you did this as a job; what is your boss paying you per hour to create your awesomeness? Most artisans rate their time in the $18-$20 range. I think you're worth it, you should too. Trust me, you wouldn't do this job for minimum wage. You also need to add some overhead for packaging and other materials that can't make it into the rest of the price, because all of that stuff really goes into making your sale.
There are several formulas for pricing items to keep you competitive and profitable; the one I use is pretty simple. First I figure the base price, that is the price it cost me to make it. I add parts plus time (labor) plus overhead (I use a flat 20% on the parts + labor to get my overhead). To get my base. (P + L + O = B)
My parts on this piece were $5, my labor was 15 minutes at $20, so $5, my overhead then was 20% of $10, so $2. Adding these all together, my base price for this item is $12. This is what it costs me to make this item. If I were to sell the item at this price, I would have no profit whatsoever.
On top of my base price, I have 3 price points; wholesale, direct and retail. The markup I use for wholesale is 2.5 times parts plus labor and over head. (P*2.5 + L + O = W); for direct it’s 3 and for retail it’s 6.
So, an item that costs me $12 to make would be priced at $19.50 for wholesale, $22 for direct and $37 for retail.
You will have to decide what you think is the right pricing for your craft business, but remember, there is no benefit to you or anyone for underpricing (and undervaluing) your work.