EC2 pricing models (on-demand, reserved, spot) in AWS - Step-by-Step Execution

Process Flow - EC2 pricing models (on-demand, reserved, spot)

Start

↓

Choose Pricing Model

↓

On-Demand

↓

Pay per

↓

hour

↓

Flexible

↓

No long

↓

term

↓

Use EC2 Instance

↓

End

This flow shows how you pick an EC2 pricing model and what happens next: On-Demand means pay as you go, Reserved means commit and save, Spot means bid for cheap but risk interruption.

Execution Sample

AWS

Choose pricing model:
if On-Demand:
  pay hourly
elif Reserved:
  commit 1-3 years
  pay less
elif Spot:
  bid for capacity
  risk interruption

This code chooses an EC2 pricing model and applies its payment and usage rules.

Process Table

Step	Pricing Model Chosen	Payment Type	Commitment	Cost Behavior	Risk
1	On-Demand	Pay per hour	No commitment	Flexible, higher cost	No risk of interruption
2	Reserved	Pay upfront or partial	1-3 years	Lower cost, save money	No risk of interruption
3	Spot	Bid for capacity	No commitment	Lowest cost	Can be interrupted anytime
4	End	-	-	-	Pricing model selected and applied

💡 Execution stops after pricing model is chosen and payment rules are set.

Status Tracker

Variable	Start	After Step 1	After Step 2	After Step 3	Final
Pricing Model	None	On-Demand	Reserved	Spot	Selected
Payment Type	None	Pay per hour	Pay upfront or partial	Bid for capacity	Set
Commitment	None	No commitment	1-3 years	No commitment	Set
Cost Behavior	None	Flexible, higher cost	Lower cost	Lowest cost	Set
Risk	None	No risk of interruption	No risk of interruption	Can be interrupted anytime	Set

Key Moments - 3 Insights

Why does Spot pricing have a risk of interruption?

Spot instances use unused capacity that can be taken back by AWS anytime, as shown in step 3 of the execution_table where risk is 'Can be interrupted anytime'.

Does Reserved pricing require payment upfront?

Reserved pricing can require upfront or partial payment for 1-3 years commitment, as shown in step 2 of the execution_table under 'Payment Type' and 'Commitment'.

Can On-Demand pricing be stopped anytime without penalty?

Yes, On-Demand pricing has no long-term commitment and no interruption risk, as shown in step 1 of the execution_table.

Visual Quiz - 3 Questions

Look at the execution_table, which pricing model requires a 1-3 year commitment?

A On-Demand

B Reserved

C Spot

D None

💡 Hint

Check the 'Commitment' column in the execution_table rows.

At which step does the risk of interruption appear?

A Step 1

B Step 2

C Step 3

D Step 4

💡 Hint

Look at the 'Risk' column in the execution_table.

If you want the lowest cost but accept possible interruptions, which pricing model should you choose?

A Spot

B On-Demand

C Reserved

D None

💡 Hint

Refer to 'Cost Behavior' and 'Risk' columns in the execution_table.

Concept Snapshot

EC2 Pricing Models:
- On-Demand: pay hourly, no commitment, flexible, higher cost
- Reserved: commit 1-3 years, pay upfront or partial, lower cost
- Spot: bid for unused capacity, lowest cost, can be interrupted
Choose based on cost vs. flexibility needs.

Full Transcript

This visual execution shows how AWS EC2 pricing models work. You start by choosing a pricing model: On-Demand, Reserved, or Spot. On-Demand means paying hourly with no long-term commitment and no risk of interruption. Reserved requires a 1-3 year commitment with upfront or partial payment, offering lower cost and no interruption risk. Spot lets you bid for unused capacity at the lowest cost but can be interrupted anytime. The execution table tracks each step's payment type, commitment, cost behavior, and risk. Key moments clarify why Spot can be interrupted and Reserved requires commitment. The quiz tests understanding of commitment, interruption risk, and cost trade-offs. This helps beginners see how pricing choices affect cost and usage.

Practice

1. Which EC2 pricing model allows you to pay only for the compute time you use without any long-term commitment?

easy

A. Dedicated hosts

B. Reserved instances

C. Spot instances

D. On-demand instances

Solution

1. Step 1: Understand On-demand pricing

   On-demand instances let you pay per hour or second without any upfront commitment.

2. Step 2: Compare with other models

   Reserved requires commitment; Spot can be interrupted; Dedicated hosts are physical servers.

3. Final Answer:

   On-demand instances -> Option D

4. Quick Check:

   Pay-as-you-go = On-demand [OK]

Hint: No commitment means On-demand pricing [OK]

Common Mistakes:

• Confusing Reserved with On-demand
• Thinking Spot is always available
• Mixing Dedicated hosts with pricing models

2. Which of the following is the correct way to describe Spot instances in AWS EC2?

easy

A. Instances with a fixed monthly fee

B. Instances that use spare capacity and can be interrupted

C. Instances reserved for 3 years with upfront payment

D. Instances that run only on dedicated hardware

Solution

1. Step 1: Define Spot instances

   Spot instances use spare AWS capacity and are cheaper but can be stopped anytime.

2. Step 2: Eliminate other options

   Fixed monthly fee applies to Reserved; dedicated hardware is Dedicated hosts.

3. Final Answer:

   Instances that use spare capacity and can be interrupted -> Option B

4. Quick Check:

   Spot = spare capacity + interruption [OK]

Hint: Spot = cheap but can stop anytime [OK]

Common Mistakes:

• Thinking Spot has fixed fees
• Confusing Reserved with Spot
• Mixing Dedicated hosts with Spot

3. You launch an EC2 instance using Spot pricing. What happens if AWS needs the capacity back?

medium

A. Your instance is stopped or terminated with a 2-minute warning

B. You are charged the full On-demand price instead

C. Your instance continues running without interruption

D. Your instance is automatically converted to Reserved pricing

Solution

1. Step 1: Understand Spot instance interruptions

   AWS can reclaim Spot instances anytime, giving a 2-minute warning before stopping or terminating.

2. Step 2: Check other options

   Instances do not continue uninterrupted; no automatic price change or conversion to Reserved.

3. Final Answer:

   Your instance is stopped or terminated with a 2-minute warning -> Option A

4. Quick Check:

   Spot interruption = 2-minute warning stop [OK]

Hint: Spot instances get 2-minute stop warning [OK]

Common Mistakes:

• Assuming Spot instances never stop
• Thinking Spot switches to On-demand automatically
• Believing Spot instances run like Reserved

4. A user wants to save costs by committing to a 1-year usage but accidentally selects On-demand pricing. What is the main issue with this choice?

medium

A. On-demand pricing does not offer cost savings for long-term commitment

B. On-demand pricing requires upfront payment for 1 year

C. On-demand pricing instances cannot be launched immediately

D. On-demand pricing instances are always interrupted

Solution

1. Step 1: Understand On-demand pricing characteristics

   On-demand pricing charges per use with no upfront or commitment discounts.

2. Step 2: Identify the cost-saving option

   Reserved instances offer savings with 1 or 3 year commitments, unlike On-demand.

3. Final Answer:

   On-demand pricing does not offer cost savings for long-term commitment -> Option A

4. Quick Check:

   Commitment savings = Reserved, not On-demand [OK]

Hint: Commitment savings only with Reserved pricing [OK]

Common Mistakes:

• Thinking On-demand requires upfront payment
• Believing On-demand instances are delayed
• Confusing interruption with Spot pricing

5. A company runs a critical web application that must be available 24/7 with predictable costs. They also want to reduce expenses by committing to usage. Which EC2 pricing model should they choose and why?

hard

A. Spot instances, because they are cheapest and can be interrupted

B. On-demand instances, because they have no commitment and flexible pricing

C. Reserved instances, because they offer cost savings with a commitment and stable availability

D. Dedicated hosts, because they provide physical isolation

Solution

1. Step 1: Analyze availability and cost needs

   Critical 24/7 apps need stable availability and predictable costs.

2. Step 2: Match pricing models to needs

   Reserved instances provide cost savings with 1 or 3 year commitment and stable availability; Spot can be interrupted; On-demand is flexible but more costly.

3. Final Answer:

   Reserved instances, because they offer cost savings with a commitment and stable availability -> Option C

4. Quick Check:

   Critical + savings + commitment = Reserved [OK]

Hint: Stable + savings + commitment = Reserved instances [OK]

Common Mistakes:

• Choosing Spot for critical apps despite interruptions
• Picking On-demand for cost savings
• Confusing Dedicated hosts with pricing benefits