Final answer:
Firms create new products to respond to changing consumer needs and preferences, which allows them to remain competitive and increase profits. Continuous innovation and adoption of new technology are essential as they lead to reductions in production costs and higher market demand.
Step-by-step explanation:
Firms create new products primarily for the following reasons:
C. To respond to changing consumer needs and preferences.
This choice aligns with one of the fundamental drivers behind introducing new products. Consumer needs and preferences evolve over time due to various factors such as technological advancements, shifts in lifestyle, changing demographics, and emerging trends. To remain competitive and relevant in the market, firms often innovate and introduce new products or modify existing ones to meet these changing demands and preferences.
Creating new products allows companies to stay connected with their customer base, attract new customers, and retain existing ones by offering solutions that address their evolving needs and desires. It's a strategic way for firms to adapt to market changes, enhance their product lines, and maintain or increase their market share by staying ahead of the curve.
A and D are not accurate reasons for creating new products. Increasing production costs (A) generally isn't a primary motive for firms, as new product development is usually seen as an investment in potential future revenue. Similarly, reducing innovation and creativity (D) goes against the usual business objective of fostering innovation to stay competitive and meet market demands.
Therefore, choice C - to respond to changing consumer needs and preferences - best represents the primary motivation behind firms creating new products.