The next day at 11:00 a.m., Higgins and Pickering are at Higgins's place on Wimpole Street. Higgins has just shown Pickering his Universal Alphabet, and they are about to break for lunch when Mrs. Pearce shows Liza in. She has cleaned up somewhat and wants it to be known that she arrived in a cab. She wants to take language lessons from Higgins, and she offers to pay him back some of the money that he threw into her basket the night before in exchange. She also implies that he was drunk when he gave her the money. Ultimately, she wants to work in a flower shop, which requires that her accent become more genteel.
The idea of teaching someone like Liza grows on Higgins, especially after Pickering bets him he could not pass her off as a lady at the Ambassador's Ball in six months. Pickering offers to pay the full costs of the experiment, having Liza live in the house to become a full-time pupil. Mrs. Pearce protests that the arrangement would be improper. She urges Liza to go home to her parents, but Liza replies that her parents turned her out of their home once she was old enough to make a living. Pickering protests that the girl might have some feelings, but Higgins claims that she has none at all.
Liza attempts to leave, but Higgins offers her a chocolate. As a claim of good faith and to settle her fear that it is poisoned, he cuts it in half, eats one half, and gives her the other. He says that if she is a successful student, he will give her some money to start life as a shop lady. She accepts. She is hustled away by Mrs. Pearce to be given a bath.
Pickering asks Higgins if he is to be trusted around women, and Higgins expresses incredulity at the idea of being attracted to Liza. Pickering feels assured of his honorable intentions. Mrs. Pearce reenters the room and makes Higgins promise to act as a role model for Liza by not swearing. The training is to be about culture and manners rather than language alone.
Liza's father, Alfred Doolittle, arrives at the house. Higgins amazes Alfred by immediately guessing that his mother was Welsh. Undeterred, Alfred claims that he wants his daughter back. Higgins says that she is upstairs and that her father may have her at once. Alfred, taken aback, says that Higgins is taking advantage of him. Higgins claims the reverse, arguing that Alfred is trying to blackmail him. Higgins says that Alfred sent Liza there on purpose. Alfred claims that he has not even asked for money yet, saying that he only found out where Liza was because she took the son of her landlady for a ride in the cab on the way over to Higgins's house. He stayed around hoping to get a ride home, and she sent him to get her luggage when she decided to stay at Higgins's house. The boy reported to Alfred that she only wanted her luggage, but not to bother with any clothes. Alfred says that this report naturally made him anxious as a father.
Higgins, seeing that Alfred has brought his daughter her luggage, asks him why he would do that if he wanted to bring Liza back home. In not too subtle language, Alfred says that he does not mind if Liza becomes Higgins's prostitute so long as he gets some money out of it, too. He asks for five pounds. He adds that his life is very hard because he is one of the "undeserving poor."
Higgins, who finds this character delightful, offers him ten pounds, but Alfred takes only five, saying that ten is too much and might make him feel so prudent that he would want to save the money. Five pounds is just enough for a spree for himself and his "missus." Pickering says that he should marry his missus. Alfred replies that he is willing, but the missus likes being unmarried because it means that he has to be nicer to her and give her presents.
Liza enters wearing a stylish Japanese kimono, now that she is clean from her bath. She asks her father if he recognizes her, and Pickering and Higgins express surprise that she has cleaned up so well. Higgins invites Alfred to come back, saying that he would like his brother the clergyman to talk with him. Alfred makes a quick escape, however, and Higgins explains to Eliza that he said that so that her father would not return anytime soon.
Mrs. Pearce announces that the new clothes have come for Eliza to try on, and she rushes out excitedly. Pickering and Higgins remark about how difficult their job will be.
Despite the somewhat pathetic figure that she cuts initially, Liza's goal is admirable. She longs for that which is precisely so difficult in British society: self-improvement. In this act, Mrs. Pearce is the foil for Liza; she represents propriety and morality. Mrs. Pearce is duly shocked at Liza's wish to attain a higher social class. The American motif of success and class mobility through individual hard work is not part of Mrs. Pearce's cultural inheritance.
Shaw is at pains in this act to show that Eliza does not enter into the deal willingly. Rather, she is manipulated into participating in the experiment by Higgins's chocolates, plus his promises to her that she will get married or own a flower shop if she does what he says. His offer is one that she can hardly refuse in order to get what she wants. Shaw, who is often read as a feminist playwright, sets Eliza up as a victim of the two older, better educated men, who take up Eliza's case as a challenge rather than a humanitarian endeavor. This situation gives emotional weight to her later anger against them.
The appearance of Eliza's father in this act is quite important, because we realize just how rough a background Eliza comes from. She is an illegitimate child whose father is a dustman willing to pimp his daughter. Doolittle, whose name is a pun on the fact that he hardly works, defines himself explicitly as a member of the undeserving poor. Despite the humor that arises when Doolittle explains that he is no less deserving than a widow who collects from a number of different funds for the death of the same husband, the man's joke holds a grain of truth. As a socialist, Shaw was concerned with all of the poor, not just the working or bereaved poor.