Harry enjoys his weeks at The Burrow, and he marvels that every object in the house is enchanted in some way. Mr. Weasley pays a great deal of attention to Harry, asking him question after question about Muggle life. One day, letters containing school supply lists arrive by Owl-post. Ginny Weasley is remarkably clumsy whenever Harry is nearby. We meet another Weasley brother, Percy, the oldest child still living at home, who is studious, stuffy, annoying and harmless. All of the boys except for Percy spend an afternoon practicing Quidditch in a nearby hidden field, and while they fly through the air, Ron comments that his parents will have trouble paying for all of their new school supplies and robes. Harry feels a twinge of guilt, as he has in a wizard bank a fortune left to him by his parents; he never worries about money, and the Weasleys always do.
Several days later, the Weasleys and Harry prepare to travel to Diagon Alley to buy their school supplies. The travel method of choice is called Floo powder, and it is thrown into a lit fireplace, creating a passageway that will take the traveler to the destination fireplace of his or her choice. When it is Harry's turn to enter the flames, he swallowed a bit of hot ash and mumbled out "Diagon Alley," and so the Floo powder misunderstood him and took him instead to a fireplace inside a dark, dusty shop covered with evil-looking masks and human bones. Harry, not wanting to be seen, hides in a cabinet and ends up overhearing a conversation between the shop owner and Lucius Malfoy, who has just entered with his son Draco. Draco is complaining about how unfair it is that he is not allowed to play Quidditch yet, while Harry Potter is on his Hogwarts house's Quidditch team. Lucius warns him surreptitiously not to appear unfond of Harry, since he is a hero in the wizard world. Lucius then hands the shop owner a list of things he must sell immediately, in case the Ministry of Magic searches his house. Meanwhile Draco is touching objects in the shop and complaining, now about Hermione Granger, who gets better grades in all of her classes than he does, and Lucius responds unsympathetically, snapping that Draco should be embarrassed to be surpassed academically by a girl with no wizard blood.
The Malfoys leave, finally, and Harry darts out of the shop. He sees a sign indicating that he is in Knockturn Alley. Before he can decide what to do next, he is suddenly approached by Hagrid, Hogwarts' enormous and good-hearted gamekeeper. Hagrid whisks Harry away, warning him against Knockturn Alley, and soon they are back in Diagon Alley, where the Weasleys and Hermione are waiting, all worried about Harry's whereabouts and relieved to see him. Mrs. Weasley makes a beeline for Harry and fusses over him, while Mr. Weasley makes a beeline for Hermione's parents, both of whom are Muggles, and proceeds to ask them endless questions. The group heads toward Gringott's Bank, where goblins guard their money. A sad scene takes place when Mrs. Weasley scrapes every last sickle out of her family's vault, while Harry discreetly shoves handfuls of his large inheritance into his bag.
They wander around into several magical stores, eventually winding up at Flourish and Blotts, where they buy their schoolbooks. Inside, Gilderoy Lockhart is signing copies of his autobiography to a line of eager middle-aged witches. Lockhart catches sight of Harry and demands that they be photographed for the newspaper together. He then informs them that he will be teaching Defense Against the Dark Arts at Hogwarts this coming year.
Meanwhile, the Malfoys enter the bookshop and make a series of disparaging remarks to the Weasleys about their meager financial situation and about the non-wizard blood of the Grangers, who are standing nearby. Mr. Weasley and Mr. Malfoy get into a fistfight in the middle of the bookstore. The men are separated, and Mrs. Weasley is horrified. The Weasleys and Harry say goodbye to Hermione and her parents, before heading back to the Burrow.
This chapter explains more unfamiliar aspects of wizard life. Some of these places and things are as new to Harry as they are to us, although many are mentioned and explained in the first book of the series. The trip to Diagon Alley is significant because it portrays an entire wizard community, showing its commerce and customers to be akin to typical Muggle communities, although of course in Diagon Alley, the goods sold are slightly different and the bank is guarded by goblins. This reveals the potential for thoroughness in the creation of a wizard world; they live active, busy lives, and in places like Diagon Alley, everybody is a wizard, so that they are not forced to keep themselves tucked away from Muggle vision. This chapter especially gives the reader a glimpse of what is to come at Hogwarts: a bound, insular, inherently cozy environment of magic and magical people; no matter what tensions and animosities exist, everybody has their capacity for magic in common.