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The setting of the book is truly within the fantasy world Rowling created for Harry Potter and his friends; a place where witches and wizards and magical beings of all sorts exist side by side with ordinary beings. Rowling describes the habitat of these creatures as if they existed in the real world, informing readers that the Leprechaun lives only in Ireland, for instance, and that the Tebo lives in the Congo and Zaire. All of these creatures can materialize in Harry Potter's world, however, though often times only the wizards can see them. Newt Scamander, in his introduction, explains one reason why Muggles, or ordinary folks, rarely see them. Muggles fear magic, he explains, so they are under the illusion that these creatures exist only in the imagination. The setting of the book, therefore, is the imagination, and any reader who finds himself captivated with Rowling's books lives in the imagination as well.

Source(s)

Fantastic Beasts and Where to Find Them