Elka, the town prostitute, acts foolishly by getting pregnant and then trying to pass off the man's child as Gimpel's. In other words, a fool is treating someone else like a fool. Gimpel in turn marries Elka, and when her illegitimate child pops out only four months after they're married, Gimpel is gullible enough to believe his wife's explanation that the child is merely premature. Fortified by her husband's willful ignorance, Elka goes on to have yet more children, none of whom are Gimpel's.
Eventually Elka realizes how foolish she's been and begs Gimpel's forgiveness as she lies on her deathbed, but the damage has been done. Elka's merely been continuing a long-standing local tradition, whereby the townsfolk feel the need to treat Gimpel like a complete idiot every chance they get. Elka's serial infidelity is really no different to the behavior of those cruel individuals who used to come into the baker's shop when Gimpel was younger and tell him, among other things, that the Messiah had come and that the dead were rising from their graves.