* Magnesium (Mg)

* Oxygen (O)

Let's break down why:

* Elements are the fundamental building blocks of matter and cannot be broken down further by chemical means.

* Compounds are formed when two or more elements combine chemically in a fixed ratio.

* Mg and O are both elements.

* MgO is a compound, magnesium oxide, formed by the chemical combination of magnesium and oxygen.

The equation represents the reaction between magnesium and oxygen to form magnesium oxide.