Apple has a particular image for themselves. They are known for having products that are on par with other companies and pricing them much, much higher. This means they get a lot of money from people buying the brand name, but it also alienates them and creates a rift. If they had a line of cheaper products, including an iPhone, it would help lower their reputation as overpriced equipment manufacturers.
Apple iPhone prices are way too high, they should make a cheaper phone. People waste over $500 on an Apple iPhone, it makes criminals target them. Also it is pointless because after a year or so Apple just comes out with a new phone, I think a less expensive phone would be a great idea.
Quite simply, why should they? The mindless masses follow herd theory and buy the latest iPhone regardless of price. It'd be bad business for Apple to do anything other than continue to churn out the latest version for people to stand in line for a week to purchase on launch day.
Apple should not create and sell a less expensive iPhone. There is no reason to do so when the phones they make now sell so well. You get what you pay for and apple makes the best phones on the market right now. If people want phones at a cheaper price they should buy a different phone or get a used iPhone.