Explanation: One elf (singular), two elves (plural). Elves are mythological beings found in stories like The Hobbit or found at the north pole working for Santa Claus. The alphabet is learned by school children in all English speaking schools (and other languages too!). “Elf” sounds like “alf” or “alph,” the first part of the word alphabet. This joke is funny because it plays on the sounds in elf and alph.
Thanks “Tree” for sending the joke.