Question: "Why does God create people when He knows they are going to go to hell?"
Answer: Please understand that God does not cause anybody to go to hell. Rather, man chooses to go there on his own. You can see the progression of those who reject Christ in the first three chapters of the book of Romans. The wrath of God is revealed against the unrighteous because man rejects the Creator and worships the creation (Romans 1:18–20). Men profess to be wise in their own eyes (Romans 1:22) and exchange the glory of God for created things (Romans 1:23–25). These people then continue in a downward spiral of sin that is listed in Romans 1:28–31, sins to which all of us can relate. Not only do they participate in these sins, but they also approve of those who do them (Romans 1:32). Not only do humans have the creation of the world to see God's power, but they also have their consciences convicting them of their sin (Romans 2:14–15). In the end, people are left without excuse. We deserve to die for our sins, and we stand condemned in front of God.
Jesus Christ came in the flesh so that "you may believe that Jesus is the Messiah, the Son of God, and that by believing you may have life in his name" (John 20:31). This is another witness to God's existence and also stands to condemn those who choose to reject Christ as the Son of God. Because Christ came to pay the price of sin, and He came to make the Father known (John 1:18), people have no excuse for rejecting Him. People choose to go to hell because they reject Christ, not because God causes them to go there. God has paid the price, revealed Himself to all, and now humans are "without excuse" (Romans 1:20). God allows people to be born to give them the opportunity to believe, but it is a person's responsibility to make that choice. What kind of God would He be if He did not give people the opportunity to place faith in the Lord?
This is still a very difficult concept to grasp. We can only cling to what we know about God's nature and character, trust that His sovereignty and mercy do not contradict one another, and believe that everything He does and/or allows will ultimately be for His glory. We submit ourselves to Him in worship and obedience and trust that He "works out everything in conformity with the purpose of his will" (Ephesians 1:11) and that His ways are perfect, even when we don't understand them. "He is the Rock, his works are perfect, and all his ways are just. A faithful God who does no wrong, upright and just is he" (Deuteronomy 32:4).