Erik Valborg, nicknamed "Elizabeth" by the village boys, is working in Nat Hicks' tailor shop. Like Carol, he loves beautiful things and finds no intellectual companionship in Gopher Prairie. Carol first sees him in church and is struck by his unusual appearance. Later, however, at Sunday dinner with the Smails, Carol hears the newcomer unfavorably analyzed.
A new teacher of English, French, and gymnastics, Fern Mullins, boards with Mrs. Bogart across the alley. She and Carol become acquainted and find they have many tastes and experiences in common. Meeting Erik Valborg at the tailor shop, Carol learns that he is interested in dramatics, particularly stage settings and costumes. He has no sense of humor and mispronounces about one word in ten of those learned from books, yet he is artistic and has a desire for culture. Carol invites him, with Fern, to a conference at the Kennicott home, to consider putting on another play in Gopher Prairie. Erik recommends Suppressed Desires or The Black Mask, the latter rejected by Fern because of its horror.
As Carol becomes better acquainted with Erik, she finds that he has done considerable reading but very little real study. She tries to help him to see the weak spots in his education and to mend them. Mrs. Westlake is "gaping from her porch" and Aunt Bessie and Mrs. Bogart from their respective windows as Carol and Erik walk by together, leading little Hugh.
Carol realizes that she should try to help Erik, though at the same time he must be independent. When he plans a tennis tournament, she participates, along with the Woodfords and the Dillons. The other expected guests do not arrive, however, and Dr. Kennicott comes for his wife to go with him to the cottages by the lake, where the Haydocks, the Dyers, and the Clarks are, since the tournament is to be held there. Erik and his four companions are snubbed. When Carol seeks Erik the next day in the tailor's shop, he tells her that she is his teacher and shows her a sketch of a dress he has designed for her. She looks at the sordid surroundings of the shop and realizes that hers is a "backyard romance," yet the boy recalls to her some of her father's sayings.
Mrs. Dave Dyer seems not to share the town's prejudice against Erik. Dave Dyer also thinks that "Elizabeth" is smart. Needing new clothes, Carol consults a Gopher Prairie dressmaker and milliner, Mrs. Swiftwaite. The available garments, however, are "tabby and small-towny."
Fern Mullins, Carol, Cy Bogart, Erik, and the Dyers have a picnic by the shores of Lake Minniemashie. Carol and Erik take a boat ride together and, returning to the picnic grounds after dark, find the others are all gone. The next day, Mrs. Bogart needles Carol about the boat ride, making knowing remarks, and Carol is uneasy that scandal may be starting. A few days later, she asks her husband to let her go to Chicago for a few days, but he refuses. Thus she is thrown at Erik, though she realizes that hers is "a pitiful and tawdry love affair."
The smart set frequents the lawn festivals of the Episcopal Church and Erik, no longer quite an outsider, is in the group. He tells Carol that Lyman Cass has made him a wonderful offer to work in the flour mill and eventually to become a manager. Carol infers that he can also marry the boss' daughter, Myrtle Cass. Carol disapproves of the plan, since it will not only break up her relationship with young man but will also reduce him to permanent mediocrity.
One evening while Dr. Kennicott is on a country call, Erik calls on Carol. He asks to see Hugh and the upstairs rooms. As he leaves, Mrs. Westlake is walking by. Two evenings later, Dr. Kennicott reveals to his wife that Mrs. Westlake has made a matter of town gossip all the secrets that Carol has entrusted to her. Vida Wutherspoon warns Carol about the rumors connected with Erik Valborg and explains what an innocent liking for the young man may drift into.
When Aunt Bessie tries to pump Carol the next afternoon, the younger woman is not too polite. That night she alternately considers various ways of leaving Kennicott, then remembers his good points. She feels as insecure as a shadowed criminal, certain that everyone is watching and talking about her.
Fern Mullins, who has indiscreetly gone to a barn dance with Cy Bogart as her escort, has invited trouble. Cy's mother drives the young teacher from the house, accusing her of drinking with her own pupils and of causing Cy to come home drunk. Carol, conscious of her connection with Erik, wonders if her own social position has prevented the wrath of the townspeople from falling on her instead of on Fern.
Fern flees to the Minniemashie House, where Carol finds her abject and utterly cowed. Fern's side of the story is that Cy had stolen the bottle from a farmer and had forced her to taste the liquor. She finally got Cy home in a rickety buggy, only to be herself driven out of the house by Cy's irate mother. Carol takes the matter to Sam Clark, president of the school board, asking that Fern be exonerated. Instead, the board requests the teacher's resignation. Fern leaves Gopher Prairie on the train, as Miles Bjorstam had done before her. A letter written later to Carol reveals that Fern has been blamed by her own family and has also been refused another job by teachers' agencies.
Sinclair Lewis has two more misfits wander into Gopher Prairie to become kindred spirits of Carol. Erik Valborg, a Swedish farm boy, who with some training becomes a tailor's assistant, has a sense of the artistic which far surpasses his social and economic status. The other maverick, Fern Mullins, is the third woman college graduate to be introduced to Main Street. Unlike Carol and Vida, Fern is a product of the state university. It is notable that Carol now turns to those younger than she for companionship, whereas she had formerly sought those more mature.
A rather inadequate romance between Carol and Erik Valborg is developing in this section, to reach its climax in the next. Note that Maud Dyer, who, as the reader knows, is trying on the sly to attract Dr. Kennicott away from Carol, takes Erik's part and flatters Carol with attentions. Like Mrs. Dyer, Carol can find no relief, even temporary, from her environment. Consequently she is drawn more deeply into the affair with Erik.
The mediocrity of Gopher Prairie is again emphasized by the drab surroundings of the tailor shop and in the person of Mrs. Swiftwaite. Her skirt is "hysterically checkered," her cheeks too highly rouged, and her lips sharply penciled, the typical, overly feminine styles and make-up in the second decade of the twentieth century.
"Done to death by slanderous tongues" is the young and lively high-school teacher, Fern Mullins. Carol, inwardly guilty because of her flirtation with Erik, wonders if Fern is being made the scapegoat for her own escapades. Gossip enlarges the tale as it is told and retold, the final version being that Fern had brought a whole case of whiskey and two other "cradle robbers" to the barn dance to prey on the innocent young boys. Thus the story of Fern is, like many others, expanded by retelling. The fury of injustice, the longing for financial stability as means for purchasing the finer things of life, jealousy, and rationalization are all ingredients of this section.