How is the party in chapter 3 of The Great Gatsby significant to the rest of novel?

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I think that the party in Chapter 3 helps to highlight the world in which Nick has entered and the world upon which we, the reader, must render some level of judgment.  Fitzgerald draws a portrait of a party setting that is opulent and posh, but also one that features an underbelly of gossip and innuendo.  It is a realm where there is much to admire in terms of wealth and the trappings of wealth, but also one where we can see the treatment of people as means to ends as opposed to ends in their own right.  It captures the essence of the Jazz Age, a time where splendor and freedom was matched by hollowness and a corroded center.  In the end, the reader, like Nick, is left with both polarities and some type of assessment is needed.  While it might not be given at the end of the chapter, it provides a paradigm with which we can use to assess the entire time period and the people within it.

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First, the Jazz Age is presented in chapter three of The Great Gatsby as an age of luxury, opulence (abundant wealth), and hedonism (love of pleasure).

The illegal liquor flows, guests come from everywhere and stay all night, cars are everywhere, the band is many-membered, Gatsby's house is turned into almost a carnival, the library is full of books that are unreadable (the pages are uncut--they are just for show), drunks drive, and recklessness abounds. 

And the people thrive on rumors:  about Gatsby's business, his war experience, and his past. 

Gatsby does not take part in any of this, but at the same time, he is responsible for it all.  He does not drink the illegal liquor, but he serves it.

In short, the society in general is presented as irresponsible and shallow.

In addition to the description of the society, the party furthers the plot by placing Jordan and Gatsby together.  They talk for a lengthy time, due, of course, to Jordan's connection to Daisy.  Gatsby, of course, throws these lavish parties in the hope that Daisy will one day happen in to one, and he will have the chance to meet her that he's been dreaming of.  That hasn't happened, so Gatsby takes the step of talking to Jordan. 

Finally, the party introduces the reader to the character Nick thinks of as Owl Eyes, who will reappear after Gatsby's death, and the car accident foreshadows the fatal accident that kills Myrtle.

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The party of Chapter 3 is a tableau of the Jazz Age which F. Scott Fitzgerald criticizes in his novel, The Great Gatsby.  Painted symbolically with colors, this tableau's dominant color is yellow, the symbol of decay and decadence.  For instance, the orchestra plays "yellow cocktail music."  This use of synaesthesia--using one sense to describe another--merges the sensory images so that, mixed with the "robin's egg blue" of the chauffeur's uniform, the green light, and the "gas blue evening gown" and the "gaudy primary colors," the setting is garish, unreal, frivolous, and decadent--just as was the Jazz Age.

In the midst of this kaleidoscope of colors "under a constantly changing light," there is the symbol of wealth, the automobile.  In addition to his yellow station wagon, Gatsby's Rolls Royce becomes an "omnibus"  for his superficial and artificial and duplicated guests:

...we sat down at a table with the two girls n yellow and three men, each one introduced to us as Mr. Mumble.....

'I like to come,' Lucille said.  'I never care what I do, so I always have a good time.'

....We all turned and looked around for Gatsby.  It was testimony to the romantic speculation he inspired that there wer whispers about him from those who had found little that was necessary to whisper about in this world.

Then there is the one that Owl Eyes, who insists that he knows little about driving, ends up with a wheel off, although he tries to drive. This accident seems to foreshadow the latter, tragic accident that occurs when Daisy drives Gatsby's automobile as 

A sudden emptiness seemed to flow now from the windows and the great doors, endowing with complete isolation the figure of the host who stood on the porch.

As the evening wanes, the moon rises in the skies, and "floating in the Sound was a triangle of silver scales.  Old men dance with "flappers" until "The Jazz History of the World" is played.  Transported into the Jazz Age by what T. S. Eliot called "the object correlative," the reader experiences vicariously the sounds and sights of the age.

The evening of the party continues as wives are taken home "kicking into the night" and there is a "violent confusion of the scene."

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