Question

what is the formula for opportunity cost

Answer 1

Opportunity cost of an item is a relative term defined as what you give up to obtain that item. Say if you are a farmer and by working 1 hr you can produce 1 oz potato . But if you intend to spend that same 1 hr to produce banana , you can produce 3 oz banana.
From these you can calculate opportunity cost of potato in terms of banana and vice-versa.

Opportunity cost of 1 oz potato is 3 oz banana. Because you need to give up 3 oz banana to produce 1 oz potato.
Similarly opportunity cost of 1 oz banana is 1/3 oz potato.

Hope this helps.

Answer 2

In Australia (and in year 11) we learn the formula to be something like:

\[A_{i}=\frac{ B }{ A_{ii} }\]

Where Ai is the amount of the forgone product (B) it will cost to produce A, B is the amount of forgone product you can produce and Aii is the amount of the product you can produce.

Since that was a terrible explanation, an example of this is:

If the Australian economy can produce 10 shoes or 50 moose, what is the opportunity cost of producing 1 moose?

\[A_{i}=\frac{ B }{ A_{ii} }\]
The opportunity cost of producing 1 moose = \[\frac{ 10 }{ 50 }\]

The opportunity cost of producing 1 moose = 0.2 shoe(s).

(Note, all the formula is saying is how many shoes per moose (shoes/moose) you can produce!)