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The story is a dystopia because it describes a supposedly perfect world that is really not perfect, and hides a terrible secret.
The difference between a dystopia and a utopia is whether or not the author expects the world to be perfect. In a utopia, the author is describing a wonderful world that is perfect. In a dystopia, the author is writing a cautionary tale. The story is allegorical. In this case, the people have a perfect world, but they keep a child locked in the closet.
It could be a boy or a girl. It looks about six, but actually is nearly ten. It is feeble-minded. Perhaps it was born defective, or perhaps it has become imbecile through fear, malnutrition, and neglect.
The child is there so that everyone else can be happy. When children are older, they find out about the child. They have the opportunity to stay and be a part of it or walk away. Many walk away, disgusted, and never come back. These that walk away are not more righteous though. After all, they never come back to protect the child.
The moral of the story is that something has to give. If you want perfection, there are consequences and side effects.
The society described in this story is neither a utopia nor a dystopia. In a utopia, as it is classically defined, everything is perfect. Obviously, not everything is perfect in Omelas. There is a child suffering in the most horrible conditions we can imagine, and this child suffers as a result of the desire of the rest of the community to remain without problem or care. If Omelas were a utopia, it is doubtful that people would walk away from it; who would want, after all, to leave a place that is perfect?
On the other hand, in a dystopia, everything is unpleasant or bad, and not everything is unpleasant or bad in Omelas. In fact, there is much that is good. Utopias and dystopias are all or nothing -- either everything is bliss or everything is nightmare. Since Omelas is neither, it cannot be either.
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