AWS Certified Cloud Practitioner (CLF-C02)Cloud ConceptsEasy
A startup's finance team notes that AWS has reduced its per-GB storage prices multiple times over the past several years, even as AWS's own infrastructure costs have likely changed. Which cloud economic principle best explains why AWS is able to pass these savings on to customers?
- AThe requirement to sign long-term reserved capacity contracts
- BThe elimination of all operational expenses for AWS
- CMandatory government price caps on cloud services
- DEconomies of scale from aggregating usage across millions of customers
Show answer & explanationAnswer & explanation
Correct answer: D. Economies of scale from aggregating usage across millions of customers
Because AWS aggregates demand from a massive number of customers, it can achieve higher economies of scale than any single company could on its own, and it passes resulting cost efficiencies on to customers through price reductions.
Why the other options are wrong
- A. Reserved contracts are optional pricing models, not the reason for broad price drops.
- B. AWS still has operational expenses; it does not eliminate them.
- C. Price changes are driven by AWS business decisions, not government caps.
Economies of Scale
As aggregate usage from many customers increases, AWS can achieve greater cost efficiencies and pass the savings on in the form of lower pricing.
- One of the six advantages of cloud computing
- Driven by massive aggregated demand across all AWS customers
- Results in historical AWS price reductions over time
Memory trick: Bigger buyer, cheaper price for everyone.