This happens to me all the time!! Last week I was wearing a poncho I'd knit and someone asked me if I could knit her one!! I told her, "If you pay me $50 for it." Well, her response was "That's too much".
Let me tell you, that is NOT too much for this poncho!!!
I have fixed prices in my mind for things I've made and wear so that whenever anybody asks me, I can give them the price right there!! While I would LOVE to knit for others and get paid for it, not too many people have taken me up on my offer. Hand made things do take a lot of work and are MUCH better than what you find at your local store, but I think people just look at the price and not the amount of work involved!
Anyway, that's what I do when someone asks me to knit them something.