Free Tier Overview
AWS provides a Free Tier that offers access to various services under specific conditions. The Free Tier includes:- Services that remain free forever.
- Services that are free for the first 12 months.
- Select services offering a limited-period free trial (for example, SageMaker provides a two-month free trial).
While some services like DynamoDB and Lambda are free indefinitely, others convert to paid usage after the free period expires.
On-Demand Pricing Model
The On-Demand Pricing Model is AWS’s most popular choice for many users. In this pay-as-you-go framework, you are charged only for the resources you actually use, whether it’s compute power, storage, or networking capacity. For instance, running a virtual machine with two processors and 16 GB of RAM for 10 hours will result in charges for just those 10 hours of operation:
Reserved Instances
For long-term projects, AWS offers Reserved Instances. With this model, you commit to a specific resource (such as a two-processor, 16 GB virtual machine) for a duration of one or three years. Even if you reduce your usage during the commitment period, you are billed for the entire term. In return for this commitment, AWS provides significant discounts—often up to 66% or 72%—compared to on-demand pricing.
Reserved Instances are cost-effective when you have predictable resource needs and can commit to long-term usage.
Volume Discounts
AWS also offers volume discounts that reduce the per-unit cost as your consumption increases. For example, Amazon S3 might apply the following pricing structure:- The first 50 terabytes are charged at a certain rate per GB.
- The next 450 terabytes are billed at a lower rate per GB.
- Usage beyond 500 terabytes sees an even further reduction per GB.
Summary
Below is a summary of AWS economic models for quick reference:| Economic Model | Description | Key Benefit |
|---|---|---|
| Free Tier | Some services free indefinitely, free for 12 months on select services, and limited free trials for others. | Initial cost-free access to explore AWS services |
| On-Demand Pricing | Pay for exactly what you use without long-term commitments. | Flexibility for short-term projects and experimentation |
| Reserved Instances | Long-term commitment (1 or 3 years) that offers significant discounts. | Cost efficiency for predictable, long-term usage |
| Volume Discounts | Reduced per-unit cost as consumption increases. | Savings through economies of scale |
