Emma Katz leaned over the third-floor fire escape outside a former factory in Cobble Hill, Brooklyn. Hand over hand, she used a string to lower an orange shoebox full of cookies toward the sidewalk.

Katz tied the string in place, leaving the box hanging a few feet over the ground. Inside, passersby found not only the treats baked by Katz, but also a handwritten sign advertising the art show she and her sister Ani were hosting upstairs.

Fishing for patrons might not be common to more mainstream galleries in Chelsea, but the Katz sisters' sugar-filled bait was not designed to catch the type of people who are accustomed to buying art at mainstream prices.

The sisters, both in their 20s, have established a nonprofit organization called Recession Art and sponsored two group exhibitions in 2009. Designed for young, emerging artists who often cannot find a place in more established Chelsea and Lower East Side galleries, "Recession Art Shows" have sprung up, even as the galleries in those neighborhoods are closing.

The Katz's have set a maximum price of $500 for each piece sold and also offered some very small pieces for as little as $3. In Chelsea galleries, even the least expensive pieces of art can cost $30,000.

"The idea behind the organization was to make it easier for artists to exhibit their work, but also make it easier for art appreciators to own original art," Ani Katz said. "You still need a lot of disposable income to drop $500 on a piece of art, but it's more within reach."

Much like American home and stock prices, art prices between 2002 and 2008 grew to heights that some observers say were unrealistic. Now, in the Great Recession, galleries have closed or reduced the number of artists they represent, nonprofit organizations supporting artists are cutting their budgets, and collectors are demanding steep discounts or canceling their purchases.

While it can be difficult to track art prices comprehensively, a recent report by artprice.com, which tracks auction sales, found that contemporary art prices rose 85 percent between January 2002 and January 2008, then plummeted more than 27 percent the following year.

Meanwhile, nonprofit support for the visual arts has dropped. Seventy percent of visual arts organizations in the city had reduced their budgets as of January 2009, according to Alliance for the Arts, an advocacy and research group that caters to city arts groups.

For young artists like Chaz Ganster, 23, who exhibited at Recession Art's first show in April, the past year has been a struggle. Ever since Ganster first moved to New York in 2008, he has found it difficult to afford a place to live, let alone a gallery or studio. “I moved into a closet that was big enough for me to lay down and sleep,” Ganster said. “Then, I moved into a basement in Greenpoint … it was underground and there were no windows. I lived there for two months, until I couldn't take it anymore … I think I was just too scared of living with a rat.”

The Recession Art Show was a good fit for Ganster because he was able to keep 80 percent of the income from his sales. A typical gallery would have taken 50 percent commission, but the Katz's only take 20 percent.

"We really are trying to do this for them so that they can put a little money in their pockets, hopefully in addition to the benefit of just getting their work out there," said Emma Katz, 25, who works in theater production and at a bakery on First Avenue.

For Recession Art's inaugural show, Ani and Emma Katz rented space at the Brooklyn Artists' Gym and displayed work from eight of their friends.

"We did not set any huge goals for ourselves," said Ani Katz, 23, who specialized in photography at Harvard and now teaches part-time at an elementary school. "We wanted to see if putting on a first show would be possible and take it from there. In the end it was really successful."

Their first show broke even, thanks to some welcome media coverage. Word spread quickly and the second show attracted submissions from 70 artists. The sisters organized a jury to choose the best 15.

"No Money No Problems," the Katz’s second show, opened this fall at the Invisible Dog Gallery, a new venue in a former Brooklyn factory and away from the Manhattan mainstream. A simultaneous opening on the building's first floor helped attract a crowd, and "No Money No Problems" welcomed more than 850 people on its first night, according to the Katz's count.

"The people who really are about art for arts sake think it’s a great idea," Ani Katz said.

Still, the $600 Ganster took home from the April exhibition was only enough to get him by for a month. Indeed, as the economy has slumped, even established artists have found it difficult to afford studio or exhibition space.

The Lower East Side Printshop, a nonprofit workshop that offers free materials and studio space to a dozen artists, has seen its applications for those residencies spike to 285 from 185 last year alone, said Dusica Kirjakovic, director of the Printshop.

“A gallery that last year represented 15 artists now represents eight,” Kirjakovic said. “Fewer people are now able to provide support for artists … and the competition is greater for whatever is left in terms of support.”

Not only are smaller galleries losing ground because of the recession, but the more established galleries are as well. Charles Cowles Gallery, one of the most prominent in New York, closed in June after 30 years.

“More than 15 of the top 100 galleries had to shut down last year," said Dan Fear, who has been tracking galleries for more than 10 years for Art-Gallery.com and is a former gallery owner himself.

Fear said other money-saving trends are evident as well. “Many galleries change their location from Chelsea to Brooklyn and the Lower East Side in order to find cheaper rent. Some galleries close, but keep the website for private dealing,” he said.

Dominic J. Tagliatella, owner of Chelsea gallery DJT Fine Art, said his gallery has experienced a slowdown in traffic since November 2008. "We adjusted dramatically, by eliminating art fairs, cutting staff, cutting advertising and beginning to sell less expensive works," he said.

Jackie Battenfield, 59, an art professor at Columbia University, said her students are worried about entering a depressed art market, but said a poor economy ought to make them work harder. "They have learned how to live on the margin and that is what they have to do for a little bit longer. That makes you stronger," she said.

The artist Ganster, for his part, is prepared to press on, staying with friends and searching for cheap or free studio space.

“You can certainly make art work, but you have to be tough,” he said.