What is the importance of characters' choices, actions, consequences, and relationships in a story?

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In general, we read stories to learn about life, about the world around us, and about how people in the world react to their circumstances and experiences. Characters in stories help us see how people might react in these various situations. If we can relate to the character, that makes the story even more meaningful. In that case, we can internalize what the character is going through, how they react to it, and how they work through their problems. In so doing, we better prepare ourselves for life's circumstances as they arise from us. If we cannot relate to the characters, that can also sometimes be helpful as we then know how we would prefer not to respond to situations.

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The choices, thoughts, words, actions and consequences are all elements that contribute to the development of themes in a literary work and these events all develop the plot. The character may symbolize certain qualities such as courage, love, justice, malice, etc. And these thematic representations may contribute to an overall message or theme in the text. In fact, some works are "character-driven" which means they focus more on the character's personality than on the events. Some works are driven by character and plot such as A Separate Peace by John Knowles. 

There are also archetypal characters which help give a familiarity to a text. These are character types which have been used in literature for generations. The two most common character types are the protagonist and antagonist; good guy and bad guy respectively. A "round character" is one who is complicated or conflicted. A "flat" character is uncomplicated, usually expressing just one trait. A "dynamic" character changes and a "static" character does not. With character-driven plots, a round, dynamic character is one who is conflicted and goes through some change. Macbeth is a good example of this because Macbeth begins the play as a loyal soldier and devolves psychologically into a guilty, conflicted murderer. Macbeth is also an example of a tragic hero, one who begins good, commits some flaw and becomes bad. 

From these types and archetypes have come stock characters. (See the second link.) Examples are: hero, anti-hero, jock, nerd, wise old man, noble savage, villain, and, my favorite, the manic pixie dream girl (i.e. Zooey Deschanel in (500) Days of Summer or Leslie in Bridge to Terabithia). Many stock characters are based upon stereotypes and while this is a simplification of a character's traits, it does give the reader familiar types which he/she will recognize and thus, it makes the work more understandable. However, some innovative writers have avoided stock characters in order to explore new ways of character development and presentation. 

It really depends upon the context as to which is more important in a literary work. Characters, plot, theme, style, form, setting, historical background, authorial intent, reader's interpretation: these all play a role in what a text "means." There are developed ways of reading the code of characterization such as recognizing stock characters and tragic heroes. But when those codes are not clear, it ultimately falls to the reader to determine what the text means and what the characters contribute to those meanings. 

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What is the importance of setting, characters (their choices, actions and consequences), and the dynamics of their relationships in literature?

How characters react to their environment, their circumstances, their experiences, and other people is key to making a story work. As we read stories, we are learning about the world and its vastness. Setting tells us where and when the story takes place. This can help us learn about events of the past, speculate about events of the future, or discover new things about the events of the world we live in today. Characters provide us with thoughts and reactions to the events of the plot. They help us gain meaning from what we are reading about, they help us understand how the events impact human beings. We get to know a character's thoughts, feelings, reactions to the events of the story. Furthermore, we are able to learn how each particular character relates to other people in their lives, from loved ones to strangers they meet. All of these things contribute to helping us learn more about the story, but more importantly about the world we live in. We can learn from characters' involvement with their setting (the world around them) and the other characters they meet (the people in their lives) how they react to the world and how they handle the problems that life throws at them. Reading stories is about so much more than a literature lesson. It is about seeing  a larger world than the one we live in and learning about how people deal with what life throws their way.

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