Garry there's some sound advice in there but I take issue with this:
The true answer is that you should charge what people are prepared to pay.
In isolation this is fundamentally wrong and therefore it's misleading to show it as a single truth in large bold letters.
The single most important thing about pricing in business is to cover all costs and to have a large enough margin to earn profit. Unless you have a firm understanding of costs and what a decent profit looks like then pricing to the market is setting yourself up for a fall.
The first question anyone wanting to charge for products and services is a clear vision of why they want to charge. Do they only want to cover costs/materials and see it as a learning curve? Do they want to do a mate a favour? Do they want to set up an established business which will grow to be their sole source of income?
The next question absolutely has to be what cost will they incur. Without a clear understanding of what money is going out of the business any pricing decisions are based on a wing and a prayer. Far too many sole traders in all kinds of businesses break their backs and their hearts working all the hours they can for the same amount they could have earned in a low skilled job for half the number of hours work. Understanding how much you need to bring in to make it worthwhile will help you understand whether or not you can sell your product/services competitively in the first place, a much better route than adjusting the price to the market and then finding out months down the line when your overdraft is building that you're not making any money.
For many members here, photogrpahy is a hobby that they'd love to earn a bit of money from to buy a bit of extra kit but it doesn't go beyond that. For them, most of the below isn't really relevent, but for the few who really want to make a go of becoming a photogrpaher (or going into business in any way) there a three key aspects to know inside out, back to front and every which way but loose.
The true answer is that to be a success in any business you have to have a full understanding of three things 1) Product 2) People 3) The Numbers.
1) Product
Your product may not be the best, it may not be the cheapest, but by understanding it fully you can exploit it to it's full potential. Think of BetaMax, far better than VHS, but which solution came to dominate the VCR market? Product knowldge also includes knowing about the market. As Garry says, you have to know the market rates for your product, where your product sits within the market, and who your competitors are (and don't think competition is just other photographers either, anything which may tempt your potential customers' away from you is competition)
2) People
You have to understand people. Even you you only shoot landscapes, it's people who buy your shots. If you don't understand them you won't know how to sell to them. You have to know who your target audience is and what is going to make them choose you. You have to be able to tell a time waster from a genuine potential client so you know who to concentrate your time on. You have to understand how to get the most revenue out of a customer while still ensuring that they're happy with the deal. You have to know when to push and when to step back. Sales is all about people.
3) Numbers
The best people all have one thing in common - they know their numbers. Watch Dragon's Den. The first thing they want to know is the numbers. If the numbers aren't there then there's no point delving deeper. You have to know your numbers inside out. You have to know when a deal simply isn't worth doing, sometimes the best deals are the ones you walk away from. I work in Sales. 80% of my revenue comes from 20% of my customers. If I don't know who those customers are, and then know them inside out, I can't sell more to them and I can't guarentee that I'll keep them as customers at all.
At the end of the day, you can put the money you'd have to spend on kit in the bank and earn 4% interest, if you don't have the money and you have to borrow, you're paying out from the word go, the value of your kit is depreciating day on day and after three years will be worth a fraction of what you paid for it and finally you can get a job on minimum wage for £5.73/hour so you'd want to earn more from all your hard work than that. If you don't charge enough to cover all of the above then unless you're doing it for charitable reasons give up.