In shrek 1 there were hundreds of fairy tale creatures living in shrek’s swamp. After Farquaad was defeated they could’ve presumably gone back to living in duloc, except that in scared shrekless when the gang goes back to duloc to tell scary stories we see that the kingdom has been completely abandoned! And there only seem to be humans living in far far away. Where did the countless elves, dwarves, fairies, wizards and others go then?