Why do people make up prejudices?

prejudice is a shortening for prejudgement, reaching a conclusion based on similarity to past incidents rather than on present facts.

people do it all the time. A taxi driver sees a tall handsome man wearing an expensive suit carrying a briefcase with his arm raised. Right away the driver assumes he's hailing a cab, he can pay the fare, he's not going anywhere dangerous, he's likely to tip, possibly generously. Experienced drivers have also carried well dressed people who didn't tip, or even pay the fare, but their general experience is that its less likely with better dressed people.

we generally complain about these prejudgements when they attach negative attributes to people.

the overall pattern is unfortunately difficult to break because on balance it works in the sense that individual's prejudices lead them to gravitate to opportunities with a favorable risk-reward ratio and avoid situations with unfavorable risk-reward ratiOS.

On a larger scale this can cause a threshold effect and whole classes of individuals with a shared trait are avoided because a small fraction of people with that trait also have a strongly negative trait. The more difficult, time consuming, costly, or dangerous it is to discover the negative trait, the greater the incentive to use any easily discovered trait, even if only weakly associated. The converse also applies - there is a tendency to gravitate to, and fawn over, extremely wealthy people despite the fact that the possibility of an outsize reward or opportunity is remote because even though the chance of a reward is very low, there's almost no risk at all, so the risk-reward ratio is favorable.