Wart and Kay argue in the morning and Kay accuses Wart of sneaking out. They begin to fight and Kay, although bigger, is left with a bleeding nose and Wart with a black eye. Kay begins to sob and whimpers, "Merlyn does everything for you, but he never does anything for me." Wart feels awful and quickly scampers off to see Merlyn.
In this scene, the reader begins to empathize with Kay—his arrogance and superiority simply hides insecurities about Wart and Wart's relationship with Merlyn.
Merlyn lives in the tallest, most beautiful tower in the Castle Sauvage. Wart demands that Merlyn transform Kay, too, the next time he transforms Wart. In response, Merlyn simply tells the story of Elijah & Rabbi Jachanan: a fable about the different treatment of a poor man and a rich man by Elijah. The poor man's cow died after hosting Elijah, while the rich man got his wall repaired. It turns out the poor man's wife was decreed to die, but she was exchanged for the cow; while there was a chest of gold hidden in the wall the rich man would have found if his wall hadn't been repaired.
This story—one from the Old Testament—illustrates how Merlyn's magic works. Wart cannot always see it working, or know why it is working, but it will be ultimately revealed. Although Merlyn tells this story to illustrate why Kay does not have any adventures, it holds true for all of Wart's education: most of the lessons Wart learns are not immediately useful, but their importance will become apparent later.
Merlyn explains that sometimes you cannot understand why certain things happen, but there is usually a reason—and therefore he cannot transform Kay. Wart, upset, does not understand this logic. Merlyn, meanwhile, has a tussle with his magic as he is repeatedly sent the wrong hat (including a sailor's hat & a top-hat). Wart suddenly asks Merlyn if there is any way the pair could have an adventure without Merlyn doing magic. To which Merlyn jumps up and exclaims that the two must go straight to Hob's patch of barley after breakfast and forget their lessons for the day.
Indeed, the main reason why Wart has special lessons but Kay does not is because Wart will later become King of England and will revolutionize the political world—but this is something neither Wart nor Kay knows yet.