Holidays in the Valley : Best-Bet Toy Gifts for Youngsters and Babies : Children: Companies are responding to the economy with less expensive items that still have strong appeal.

The age of excess has passed, and toys are no exception.

This year, the emphasis is on common sense and saving cents. But that doesn’t mean the fun is gone.

Toy manufacturers have responded to the need for less expensive items that have strong kid appeal.

But beware--some toys are no bargain at any price. Consumer Reports suggests you check for small parts that can cause a child to choke, strings that tangle (and strangle), metal edges that can cut, and anything that could catch on fire or cause electric shock.

So with economy, caution and--above all--the magic of the holidays in mind, consider the following for those lucky kids on your gift list.

*Best Bets: Babies

Parents of infants will appreciate Nap ‘N Play, a clever item from Pockets of Learning. It resembles an inflatable pool but is actually a portable playpen.

Inexpensive toys from Playskool include Baby’s First Doctor Kit, Touch ‘ems Soft Blocks, Weebles Vehicles, Peek ‘n Pop, Sesame Street Li’l Busy Pals and My Very Soft Baby.

A guaranteed giggle-getter for toddlers is the new Disney Fun Bubbles Camera from Mattel; the “camera” blows real bubbles when the shutter is pressed. Also new and noteworthy from Mattel is the Disney Easy Touch Tape Player.

Last year, Playmobil’s Victorian Doll House was a huge hit; this year, the company’s Preschool Play System comes with figures and vehicles that have rounded, easy-to-manipulate shapes.

Also for bitty builders: Duplo building blocks. Look for sets with themes: zoo, farm, circus, more.

This year’s animal friends include Mattel’s 101 Dalmatians, Hasbro’s My Lov ‘Ems cuddly pups, Tiger’s Scamps, and Hasbro’s Yo Yo My Walking Kitty (a successor to Go Go My Walking

Pup).

*Best Bets: Girls

Anything that has to do with mermaids is hot this season, spawned by Disney’s popular animated movie “The Little Mermaid” (now available on videocassette).

Look for mermaid-pattern socks and other clothing, lunch boxes, coloring books, three-wheeled cycles--even sheets and towels.

Among the must-haves are Mattel’s Li’l Miss Mermaid; she changes color when wet and sings a mermaid song. And from Playskool is a colorful collection of Rainbow and Princess mermaids.

Also water-oriented are Playmate’s Water Babies; they look like baby dolls but are made of soft plastic and can be filled with warm water (so they feel real).

For those who like to “play house,” venerable toy maker Fisher-Price has a new Laundry Center with a pretend washer, dryer, iron and ironing board.

And from Nasta International is a Jewelry Maker that includes colorful beads; kids can create their own customized necklaces, bracelets and headbands.

*Best Bets: Boys

To commemorate the production of more than 1 billion Hot Wheels vehicles, Mattel has introduced a collectible series of gold-tone mini-Corvettes.

Matchbox also makes inexpensive miniature cars, including Indy-style racers. The company’s new Graffic Traffic lets kids custom-decorate the tiny vehicles.

New from Kenner is the Claw, with wheels that expand to reveal rotary claws when the going gets rough; Tyco’s RC Fast Traxx has turbo treads that go off-roading with ease.

Both Galoob and Lego have come out with toys (the Motor Muncher and Brick Vac) that scoop up small playthings and tiny bricks, making cleanup hassle-free.

Any child into electric racing will be thrilled with Tyco’s Super Duper Double Looper with Upside-Down Jump. There’s also Marchon’s MR-1 Electric Road Racing line, endorsed by Indy 500 winner Johnny Rutherford.

Move over Turtles: New heroes from Hasbro include Bucky O’Hare (vs. the Toad Menace), Talking Wrestlers and Pirates of Dark Water.

There are Earth-saving personalities too: Kenner’s Swamp Thing, G.I. Joe’s Eco-Warriors, Playmate’s Toxic Crusaders and Tiger’s Captain Planet.

Classic toys never go out of style.