Gatsby's mansion is located on West Egg, a fictional town modeled on Great Neck. Author F. Scott Fitzgerald rented a house in Great Neck for his wife and daughter and observed it as a working-class area dotted with mansions of the newly-wealthy who, during the 1920s, often threw lavish parties. East Egg, the home of Tom and Daisy Buchanan, is based on Sands Point, a town along Long Island's "Gold Coast" where some of the most opulent estates of the American elite could be found. East Egg is more exclusive than West Egg—it takes more than money to have a house there. One must have the right social connections and background to be accepted by East Egg society.
The bay separating East Egg and West Egg is analogous to the social gulf that separates Gatsby from the Buchanans. While the bay is narrow, allowing him to see the green light on the Buchanan dock, it is essentially unbridgeable. Gatsby has the money, the home, the cars, the clothes, and even the speech patterns and affectations of a man in Tom Buchanan's class—but he was not born into wealth.
In many ways, this makes Gatsby the better man. Nick Carraway expresses as much the last time he sees Gatsby. Fitzgerald's tragic hero, after all, is a man of ideals and vision who has overcome so much and definitely achieved more on merit than Tom Buchanan. The fact that Tom Buchanan was born rich, however, gives him an in-borne sense of superiority. He looks down his nose at Gatsby's parties as "circuses," which he could throw if wanted to—after all, he gave Daisy a necklace worth over $350,000 (in 1920s money) as an engagement present.
Tom's smug sense of superiority is the weapon he uses to defeat Gatsby. When Tom points out at the Plaza Hotel that Gatsby is a bootlegger, Daisy withdraws her love and abandons him. She does this not because of any moral outrage but because Gatsby is no longer able to maintain the illusion of himself as Old Money anymore than he can uproot his mansion and move it to East Egg. Tom has pointed out not that Gatsby is a criminal but that he's nouveau riche—he's a West Egger, a trespasser trying to swim across the bay.
In The Great Gatsby, there are two cities that are separated by the Valley of Ashes. These two cities are knows as East Egg and West Egg and there are two different classes of wealth in these cities. They are new wealth against old wealth.
East Egg has people living in it that are from old money. They are born into money and have never known anything different. Their parents and grandparents have all come from money. Daisy Buchanan and her husband Tom are from old money and live in East Egg. The people in East Egg are known for being well educated usually at ivy league colleges, such as Yale and Harvard.
The people that live in West Egg are from new money. These are people who have worked hard and earned their own money. They haven't depended on inheriting money and just worked hard. They have not had ivy league educations and some of them didn't even go to college. They just went to work. The people in East Egg are seen as corrupt and mean spirited because they have always had money and never had to work for anything. They are more concerned about material things. The people in West Egg are seen as less sophisticated and more innocent about how the elite live their lives. Nick Carraway comes from old money, but decides to live in West Egg.
"I lived at West Egg, the- well, the less fashionable of the two, though this is a most superficial tag to express the bizarre and not a little sinister contrast between them...Across the courtesy bay the white palaces of fashionable East Egg glittered along the water, and the history of the summer really begins on the evening I drove over there to have dinner with the Tom Buchanan's. Daisy was my second cousin once removed, and I'd known Tom in college. And just after the war I spent two days with them in Chicago."
The contrast between these two cities is great. In East Egg, the people are seen as the wealthy and the elite. In West Egg, they are looked down upon, only because their money is new money and not old money passed down from generation to generation. Jay Gatsby lives in West Egg. He is from new money and his house looks straight across the water to Daisy's. He has always tried to prove that he is worthy of Daisy and he thinks that having this money will show her that.
The two cities represent the vastly different lifestyles of Daisy and Jay and sets up the tragic events of the story.