What Are AI Token Costs and How Do They Work?

Understanding LLM token pricing, usage patterns, and cost calculation.

AI language models charge per token. A token is roughly 4 characters or 0.75 words. Understanding token costs is essential for budgeting AI applications.

How Token Pricing Works

Most LLM providers charge separately for input (prompt) tokens and output (completion) tokens. Input tokens are typically cheaper. For example, GPT-4 charges $30/M input and $60/M output tokens.

Hidden Cost Sources

System prompts sent with every request
Few-shot examples added to prompts
Context window bloat from conversation history
Retry loops that resend entire contexts

Frequently Asked Questions

How many tokens are in a typical API call?

A simple question might be 50-100 tokens. A system prompt can add 200-1000 tokens. A conversation with history can easily exceed 2,000 tokens. Every token costs money on every call.

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