Fiction is an exploration of reality. It is an attempt to make sense of the world, to bring order into the chaos of mere events and facts by giving them a pattern, a story, a plot.
To do this well, it needs to follow certain rules. Here are my rules:
People in the fiction should be like real people, only more so. They need to have pasts and futures, likes and dislikes, and most especially, they need to want things. They must always act according to their natures, though they may be affected deeply by the events of the plot, and change. In fact, it is unrealistic to have a character who does not change as a result of the action of a dramatic story.
The ending should flow logically from the events of the story. And all the events of the story should conspire to bring you to the end. If an incident or subplot has no impact on the ending of the story, it is useless and should be left out.
Setting is necessary, and adds color, but the real work of a book should be the plot and the character. People come to a play to watch the actors play their parts, and not to admire the stage setting.