Thanks for all the useful advise!
I didn't think too much whether she is taking advantage, in fact my partner always told me she is thankful to the lady for giving her the opportunity and she is having fun making them. I am not trying to overprice or to give anyone a hard time neither, just want to see if people think it is a fair deal to go with (the lady was planning to sign a contract with us to make it $7.00 per cake topper for 1 year).
We actually asked the lady several times for opinions on the price before and she always answered "I don't know/ I have no idea". She could have given us a budget, an estimated price base on how much she charges for her cupcakes/ decorations for cakes instead of asking us back.
And just a short update, among 6-7 sets of tools the lady gave, there is 1 set of tool that my partner uses all the time (3 plastic sculpting tools), so I suggested to buy off from the lady and asked how much the tools are. She replied she needed it back to pass on to another person, who is going to make cake toppers for her from now on. The lady came and picked up the tools two hours later, along with the cake toppers we made for her last week. My partner was quite upset after I told her what was going on and kind of blaming me for what had happened, but I am just glad that it is over lol (also bought her brand new tools so she's pleased now).
Using clay for toppers is a great idea, though it may seem more like a toy and not something to put on a cupcake. We haven't use gumpaste before though we read a lot about it, will keep it in mind and give it a go :)