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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.
In the first three chapters of The Great Gatsby, Nick goes to three parties: 1) Tom and Daisy's; 2) Tom and Myrtle's; and 3) Gatsby's.
He is horrified by inappropriate behavior in each: 1) Tom's racism and infidelity; 2) Tom's cruelty to Myrtle; 3) the reckless behavior of Gatsby's guests.
Here's the significance of Gatsby's party:
A. The writing is spectacular here, which furthers the theme of grand style vs. lack of substance. Nothing really happens, but it is described beautifully. So says Enotes:
In chapter 3, Gatsby’s parties in general, and one in particular, are described in poetic fashion. Motorboats, aquaplanes, cars—these sources of amusement appear in great numbers. Food, in vast quantities and garishly prepared, comes in every Friday; once every two weeks a “corps of caterers” transforms Gatsby’s grounds into an amusement park setting.
B. The event is shallow, lacking substance:
- (41) people just there, "not invited"
- (44) gossip about Gatsby's elusive past, believing in nothing
- (46) books in library -- un-cut pages (appearance vs. reality; illegitimacy; materialism as status symbol only)
- (57) Nick resisting all strong connections -- empty relationships
- (58-59) Jordan as dishonest, no integrity
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