James Serra explains Azure SQL Database pricing:
DTU’s are explained at here. To help, there is a Azure SQL Database DTU Calculator. This calculator will help you determine the number of DTUs being used for your existing on-prem SQL Server database(s) as well as a recommendation of the minimum performance level and service tier that you need before you migrate to Azure SQL Database. It does this by using performance monitor counters.
After you use a SQL Database for a while, you can use a pricing tier recommendation tool to determine the best service tier to switch to. It does this by assessing historical resource usage for a SQL database.
For further information, check out this interesting article from a few months ago on V12 performance by Chris Bailiss.