This is a simple question and we are tempted to answer it simply by saying, "Why not? Why shouldn't God make people if He knows they are going to sin?" But, such an answer isn't very satisfying. We could always say we don't know why God would do this since He is infinite and we are not and His ways are not our ways. But this answer also leaves us a bit empty. So, let's see if we can answer the question by analogy.
When parents have children they know that their kids will eventually act in sinful and even harmful ways. Yet, that doesn't stop them from having children. Why? First of all, it is worth the risk of their rebellion to bring them into the world. Second, the nature of love is to give and by having children the parents can better express their love. Third, just because the children will sin and rebel doesn't mean they shouldn't exist. Fourth, children have their own wills and can freely choose to rebel. Knowing this parents all over the world still have children. As you can see, analogies help us to make sense of things, but they can't answer every question. That is why we must go to God's word for more insight.
The Bible tells us that God is love and that He sacrificed His Son on our behalf. The greatest act of love is to sacrifice one's own life for another (John 15:13). In a very real sense, God has performed the greatest act of love in sacrificing Himself (Remember, Jesus is God in flesh - John 1:1,14). Since God is love and love sacrifices, God has now manifested the greatest love by dying for us. In this, God is glorified. But, without sin in the world, there would be no way to demonstrate the greatest act of love -- which is self-sacrifice. So, perhaps God allowed sin in the world so that He could demonstrate the greatest act of love.
Furthermore, in this self-sacrifice God demonstrates the perfection of His holiness, the sinfulness of sin, the proof of God's righteousness, the victory over the evil one, and the guarantee of the saved with whom He can shed His love and glory forever. In this, God is glorified.
We could come up with a variety of possible reasons why God made people knowing they would sin and we probably can never fully answer this. But, knowing that they would sin is no reason that God shouldn't make them, especially if His plan includes the acts of sinners so that others would be redeemed.