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Plain-language AI glossary

Term 72InfrastructureMeaning / context / connections

Infrastructure / Definition

Token Economy / AI Pricing

The cost structure of AI APIs based on token consumption, where pricing is determined by the number of input and output tokens processed per request.

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01

MeaningThe one-sentence definition.

02

ContextHow the idea works in practice.

03

UsesWhere the concept becomes useful.

01 / Plain-language context

How Token Economy / AI Pricing works.

Token economics connects model usage to the unit economics of a product. Many providers meter input, output, cached, reasoning, media, or tool-use tokens differently, and prices can change by model, region, or processing mode. The relevant measure is the cost of completing a useful user outcome, not the advertised price of a single token.

Measure real requests, including retries, retrieval, tools, and failed work. Reduce cost with model routing, shorter context, caching, batching, output limits, and fewer unnecessary calls. Then compare infrastructure cost with support, quality, retention, and the value of the outcome before setting a product price. Always use the provider's current pricing page for a purchasing decision.

02 / Practical uses

Where it helps.

  1. 01AI product pricing strategy
  2. 02Cost optimization for AI applications
  3. 03Budget planning for AI features
  4. 04Usage-based billing systems
  5. 05Comparing AI provider costs
03 / Keep exploring
TokenizationThe process of breaking text into smaller units (tokens) that an AI model can process, typically subwords or word pieces.Inference OptimizationTechniques to make AI model predictions faster, cheaper, and more efficient in production, including quantization, batching, caching, and model distillation.Large Language Model (LLM)A neural network trained on massive text datasets that can generate, understand, and reason about human language.Batch ProcessingProcessing multiple AI requests together as a group, typically at lower cost and higher throughput than real-time individual requests.