They did not and they don't care.

A similar problem existed in the base iMac intel a few years ago. My cousin has issues with it precisely because of that. He finds ludicrous that a computer that was sold for over 1.7K euros had 8GB of RAM and an absurdly slow "Fusion Drive". The actual SSD in those is stupidly small, something like 24GB I think, all in the name of profits. He solved the disk issue by booting on an external thunderbolt SSD.

Funnily enough booting on an external SSD has a lot of caveats with Apple Silicon, but I guess we should be happy they allow it at all. Next step is making sure you have to pay a special price to access more than X amount of external storage to make sure you are forced to buy the Apple upcharge.

For some reason, current Apple fans seem to believe their entry level models were/are good. But they are an unbelievably bad deal and always were.
When you have to make an effort of a 100 but going to the next much better step only requires 20 more, stopping your effort at the first step is a bad idea, you should only do it if you have no other choice. You went most of the way and then stopped instead of maximizing your payoff.
Apple stuff was always like that, the interesting hardware started in the mid-range, and you would buy with the assumption that you would upgrade the RAM/SSD later on to avoid the Apple tax.

If you want a cheap and weak computer, Apple hardware makes no sense; you can find comparably useful computers for half the price, they are just not as nice but that's it. It is just like their SE line, where they sell you a phone with technology/design/build of a least 5 years ago. If you just want to buy a cheaper (500 euros) brand new phone there are many much better options, they won't win at chip benchmarking, but they will win at everything else (because they are not challenged with 2GB of RAM and have 8GB instead).
They sell this to milk the customers who have no option because switching would be too complicated. This way they can say that it's ok if they sell a phone at a decent price.
But in reality, the competition for that is either a secondhand phone or 200 euros phones and then you realized the update argument is pure nonsense; you could buy at least 2 comparable phones for the same amount of time your basic iPhone gets used. Funnily enough even if you use it for 5 years, you will need to change the extremely small battery that will undoubtedly be bad at half point even with very low usage.

Apple entry level hardware sells for a premium price but does not offer a premium experience because of the limitations they put into them to be able to upsell, to make more profit... And if you go for the mid-high-level hardware with the necessary options for a confortable experience, it is not a premium price anymore but luxury pricing.

I think what happens is that people mostly have belief, and when they buy their expensive but entry level hardware, they believe it is working good for the price, because they don't know what they are missing on. They don't understand how much they are getting fooled for the price. And I am fairly sure Apple knows that (considering the behavior of Apple salespeople I have encountered in Apple stores) and its even part of their strategy. If a customer comes back complaining about a slow computer, they try to upsell him and make it "his mistake". They are going to say he chose "wrong", and he should have spent more money. In other words, they are psychologically abusing people, thanks to their brand image of great performance hardware. In practice the hardware is voluntarily weakened at the entry level to upsell the bigger version where they make more profit.

As an old school mac user (started with System 9) I'm pretty sad to say it but people need to stop buying Apple crap. It is not worth it, at all. macOS is nice, but Windows is fine really, and there are tons of Linux option that are largely sufficient for a personal computer.