Understanding AI Token Costs
What are Tokens?
Tokens are the basic units that AI models process. In English, a token is approximately 4 characters or ¾ of a word. Understanding tokens is crucial for:
- Cost estimation
- Context length management
- Response optimization
- Budget planning
Cost Factors
Model Selection
- More powerful models cost more per token
- Larger context windows increase costs
- Different rates for input vs. output tokens
Usage Patterns
- High-volume discounts available
- Fixed vs. variable costs
- Development vs. production pricing
Optimization Tips
- Prompt Engineering: Write efficient prompts to reduce token usage
- Model Selection: Use the most cost-effective model for your needs
- Caching: Store and reuse common responses
- Batch Processing: Combine requests when possible
- Context Management: Only include necessary context
Common Use Cases
Development
- Prototyping
- Testing
- Fine-tuning
Production
- Customer Service
- Content Generation
- Data Analysis