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Oaxaca has an up and coming modern art scene. There are many artists who work in the city and you can easily pop into local galleries to examine and purchase their handiwork.
Arts & crafts from Oaxaca are well respected and the arts and crafts shopping options in Oaxaca are diverse not only in variety but also where one can locate the products. Outlets range from large well stocked stores or galleries to small "hole in the wall" type shops to a variety of marketplaces. Oaxaca has been somewhat spoiled by the well developed tourist trade and prices are all over the map. As a general rule, one should expect to pay higher prices than one might find in the towns or villages where products are produced.
If one enjoys the challenge and the educational experience of visiting the rural towns and villages in pursuit fo arts & crafts, you can obtain a great map at one of the Oaxaca Tourism Offices that shows the major villages throughout the State and what they are known for: Link to a scan of the map: Oaxaca Arts & Crafts Map