The Rambam writes, "There is a mitzvah to be happy on all holidays, but it is especially important to be happy on Succos, as it states [about Succos], ימים שבעת אלקיך 'ה לפני ושמחת, 'rejoice before Hashem your G-d for seven days'" (Vayikra 23).
Shulchan Aruch (Orach Chaim 529:2) states, "A person is obligated to be happy and in a good mood on Yom Tov, together with his wife and children. How does he make the family happy? By giving the children nuts and roasted grains [or other foods that children enjoy] and buying clothing and jewelry for the women according to his abilities." People tend to forget about this mitzvah, perhaps because it is so hard to keep. Even if one remembers to be happy, he might forget about his obligation to make his wife and children happy.
In Yerushalayim, there was a jewelry store near a shop selling esrogim and lulavim. A talmid chacham entered the jewelry store, while a simple yid entered the four-minim shop. Upon meeting outside, each clutching their respective purchases, the simple person proclaimed, "My purchase is superior to yours because I bought a mitzvah." To this, the scholar responded, "You bought a mitzvah דרבנן, as that year, the first day of Succos fell on Shabbos. However, I bought a mitzvah דאורייתא. I purchased jewelry for my wife, fulfilling the Torah's mitzvah to bring happiness to my wife and family on Yom Tov."
According to the Torah, the mitzvah of lulav is only one day, while the mitzvah to be happy lasts seven days. The Imrei Noam zt'l teaches that this is because Hashem loves it when His nation is happy. Therefore He commanded the mitzvah to be happy for seven days.
The Chidushei HaRim zt'l teaches that there is special kedushah on Shabbos Chol Hamoed. He explains that throughout the year, the holiness of Shabbos is created and formed from our avodas Hashem performed during the weekdays that precede Shabbos. When it is Shabbos Chol Hamoed, however, the holiness of the yom tov was created from the holy days of yom tov that preceded it, and therefore, the Shabbos is very exalted.
