In the square of an unnamed Danish town, we follow a number of people as they go about their daily business, big and small: The police officer tries to find out whether the Christmas tree seller has a "permit" to sell Christmas trees, the bicycle repairman invents a new kind of bicycle, the baker's assistant and the chimney sweep are in love, and the barber is working on a rug made of hair. Meanwhile, the Christmas tree seller sits carving small wooden figures and talking to everyone who passes by. The dramatic main story is that a modern entrepreneur wants to tear down all the old buildings in the square and replace them with a modern parking lot. Each section ends with the characters gathering around Ella's hot dog stand and singing along with the courtyard musicians.
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