How does the setting of "Araby" influence the story?

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In Joyce's "Araby," the first setting is described in terms of figurative blindness and paralysis (the street is a dead end, etc.)  This reflects the young narrator's emotional and mental and spiritual states.  He is blinded by illusion concerning Mangan's sister, his relationship with her, and the connection between the religious and the secular.  He sees himself as a religious hero, the girl as the embodiment of the Virgin Mary, and their relationship as something holy.  He is unable to separate the religious and the secular.  He is figuratively blind.

The setting of the bazaar, Araby, later turns out not to be what he assumes it will be.  Instead of being unique and exotic, it is just a mediocre traveling exhibit that sells trinkets, sponsored by the church to make money for the church. 

This setting actually propels the narrator toward his epiphany or awakening, during which he realizes that just as Araby is an illusion, so is his idealized vision of the girl as the Virgin Mary, his view of himself as a religious hero, and his view of their relationship as something special.

In short, the dark, closed facility of the bazaar, the trivial, senseless flirting he overhears, the rudeness of the worker, and the items for sale lead the speaker to his epiphany.  Again, as Araby is not what he thought it was, neither is Mangan's sister, etc. 

In the closing lines of the story, the boy sees himself in a new way, and his eyes burn--his blindness is lifted. 

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How does the setting progress the story of "Araby"?

Think about the metaphors of blindness and silence Joyce uses to describe where these characters live; the street is "blind," the rooms airless, someone has just died. The only life and color that is introduced into this boy's world comes through his awareness of a girl's braid of hair. Where she is, is light and sound; everywhere else is cast in shadow. There is promising activity, but it slows up again while he has to wait, bored and impatient, for his uncle to return home. He gets his money, gets on a train; the train moves too slowly, and when he gets to the mystical Araby fair, the place is closing down, being plunged into darkness and silence, as is the boy. The story begins with the metaphor of darkness and silence, and ends on the same note, with a twist. Now the protagonist is not just aware of how colorless his world is, he is also disgusted with himself for his vanity; it is a sin. The background Joyce alludes to, but only briefly paints, is the world of Irish Catholicism, where a young man in the throes of his first real crush, is nonetheless surrounded by a claustrophobic, self-absorbed world where the "decent" inhabitants all know each other's business, and watch, silently, while life passes them by. The narrator knows he will be one of them now, since he has let himself down. He dreamed a grand dream, and could not deliver on its promise.

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How does the setting progress the story of "Araby"?

The setting is very dark, dreary, and depressing.  It is set in Dublin, Ireland, when it was still under British control.  Many were living in poverty and had no job.  Gathering places were small pubs, which led to much drinking, and a lot of alcohol abuse.  The narrator's uncle, for example, comes home late, which makes the narrator angry, and he comes home drunk.  The narrator and his aunt and uncle live in a dreary home on a dreary street that is dark and depressing.  The story details the narrator's obsession with one of his friend's sisters.  A normally good student, the narrator neglects everything in his life to watch this girl and he becomes intent on buying her a gift at the market after he promises her one.  Because the setting is dark and not cheerful or happy, the reader can assume that the outcome might not be this way.  This happens with the narrator has an epiphany after getting to the market.  He realizes that he has wasted his time by obsessing over the girl and that his life is not as it seems.  

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How does the setting of "Araby" help progress the story?

Just to add to the cogent details already mentioned in Post #4, there is much significance to the books that the boy discovers in the priest's room.  The Abbot by Sir Walter Scott idealizes Mary Queen of Scots, who was less that an examplarary Catholic, The Memoirs ofVidocq is a popular account of the exploits of a criminal turned detective; the novel is a blend of invention, sensationalism, and prurience--all but one are odd books for a priest to have read.  These suggest, too, the boy's confusion of the religious fervor, idealism, and sexual attraction in his infatuation with Mangan's sister.

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