Final answer:
Firms create new products to expand their market reach, satisfy customer needs, and take advantage of technological advancements to gain a competitive edge and ensure future profitability.
Step-by-step explanation:
Firms create new products for several key reasons, including market expansion, customer satisfaction, and technological advancement. Market competition drives firms to continuously innovate to stay ahead, because by developing new technologies and products, they can produce more cost-effectively or with desirable features that consumers seek. As highlighted by Gregory Lee, the pursuit of innovation is essential and grants companies a temporary competitive advantage, allowing them to earn higher profits. In addition, technologies can be reused in new products, providing long-term benefits. Moreover, through new product development, companies can increase market competition, leading to more high-quality goods and potentially lower prices for consumers. Lastly, companies may expand or improve their product lines through mergers, which also plays into the strategic development of new products.