The narrator uses the setting to draw attention to the fact that Miss Emily cannot and does not change. Her house is described as having fallen into disrepair, the once white house is in bad need of a paint job. The neighborhood in which the house is located was undoubtedly one of the best but the narrator drops little hints as to the current situation by telling us that gasoline pumps and cotton gins are now nearing her property. This tells the reader that the neighborhood has lost some of its affluence.
As the narrator goes into the history and story of Miss Emily, we see her in her natural setting. In other words, she fits into the setting of the town as a young woman. However, as the town grows and develops, she does not. In this case, she represents the 'Old South'. Although not specifically stated why, we know that she has been given a reprieve from paying taxes by the Colonel. As the town grows and new town leaders come into office, they find her reprieve to be a relic of and antiquated in unjust system of favouritism. This also shows a contrast between new and old.
To sum up, the setting contrasts and highlights Miss Emily's inability to change with the rest of the town who do change. We see this in both physical descriptions of the town and in the situation described above concerning the new town officials.