Potential customers for this fall into a few categories, including:
1. Parents who don't know a lot about tech, but whose kids need "a laptop" for school.
2. Kids & young adults who want a macbook to run something like GarageBand but have a very limited budget *and* also don't otherwise know much about tech.
3. Schools.
4. School-like programs, like software dev clubs & summer camps.
These customer types need a low price, but they also need A LOT of *support*. The support is the product here.
Yes, you could personally get a more powerful computer by getting a refurb 16GB M1 MacBook Air somewhere by bargain hunting. But you will need to hunt; right now on the official refurb store the cheapest MacBook Air is $929. If you're shopping on eBay, now you've got a machine with a ton of wear cycles on the SSD, and dubious amounts of damage.
If you, personally, have the time & energy for that, it *IS* a better choice.