Why do hardcover books change to paperback?

I know, it's a dumb question. But I was too lazy to think of why a perfectly good hardcover book has to be changed to paperback a year later.

Hardcover is more expensive to produce because, unlike paperback, it won't have bent corners, the paper is thicker, and there are no stitched bindings. Once the sale of a book decreases the company stops spending on the items necessary to make the book hardcover, so they start making paperback editions. The stuff that comprises the softer versions is much cheaper and the company saves money. Also, hardcover is usually reserved for those books which the company predicts will start selling big.

It's basic microeconomics, and I didn't understand it.