Handmade is worth more. It's made by one artist, with two hands. We are not able to take advantage of true wholesale prices when buying supplies for our creations because we're just small indie companies and cannot afford to buy huge bulk orders.
I have always felt, even before I joined etsy, that handmade goods could be found in specialty boutiques and I was always willing to pay a higher price, as I felt they are more valuable than massed produced goods, especially a handknit sweater.
Judging by what people request on alchemy, it seems "handmade education" is not very widespread. Many will ask for a copy of a big box store item or designer couture, saying it's way out of their budget, so they came to etsy to get a cheap price!
One etsian said she read on a bridal site that etsy has the rep of cheap prices. People wrote in to go there to get a cheap wedding dress---ugh!
Etsy seems to have aquired this bad rep and I am not sure why. But as long as sellers are willing to bid on very low prices on alchemy, and not even cover their cost in materials, let alone receiving any sort of profit, this mindset is here to stay.