It is possible for everyone to be friends with exactly 2 people. You could arrange the 5 people in a circle and say that everyone is friends with the two people on either side of them (so you get the graph \(C_5\)). However, it is not possible for everyone to be friends with 3 people. That would lead to a graph with an odd number of odd degree vertices which is impossible since the sum of the degrees must be even.