Before you watch the video below, think about the definition of value. Is value determined by the importance an individual places on a good? Think of how you make economic decisions, do you attach numerical valuations to them? Contemplate why essential goods can be very cheap, while unnecessary luxuries can be very expensive. This very simple insight can help us understand value and human behavior. As you watch Dr. Saifedean's lecture, pay attention to what opportunity cost means, and why it flows from scarcity.
While we will discuss exchange in more detail later in the course, the concept of free exchange is introduced here to illustrate that differing subjective valuation is the only way to explain how trade takes place. If both parties benefit from a transaction and agree to partake in it, the cause must be that they do not have differing valuations of the exchanged goods. After watching the video in its entirety, reflect on the meaning of ordinal valuation, and how it is possible to value things without attaching numerical values to them.