Why is the “the yellow wallpaper” set in only one place, a bedroom?

Gilman sets the story in just one bedroom with a barred window to portray the restrictions on and seclusion of the narrator:

It is a big, airy room, the whole floor nearly, with windows that look all ways, and air and sunshine galore. It was nursery first and then playroom and gymnasium, I should judge; for the windows are barred for little children, and there are rings and things in the walls.

The isolation of the bedroom reflects the narrator’s emotional condition. Through the barred window in the room, the narrator can look outside; however, she is unable to do anything, advised to only rest by her husband to cure her of her “nervous depression.” Setting the story in only the bedroom allows Gilman to build on the narrator’s obsession with the wallpaper in the room. If she had been in a different setting; for example, one of the rooms downstairs, she wouldn’t have fixated on the wallpaper. Her opportunity to be surrounded by other people and activities would have increased in a different setting, leaving little time to her own thoughts.

the pronoun reference replaces a noun, but you have to make sure there's no room for confusion.

in the first sentence "her" could be referring to shely or to the sister. the answer there is "shelly called her sister and told her about the new baby."

in the second sentence "it" could be referring to the roof or the floor. the answer there is "since the roof leaks on the family room floor, we need to repair the roof."