Why not just transfer?

Why would people apply to really competitive undergraduate schools in U.S universities, if they can just switch undergraduate schools after getting accepted into a less competitive program from the same university?

Interesting question. Usually it is harder to transfer between schools (e.g. CAS to Wharton) than it is to transfer between majors (e.g. Biology to economics both in CAS). When you apply, you should apply to your strength. When the admission officer reads your application, and you’re obviously more passionate about business and have done business related extracurriculars, then he/she wouldn’t be you if you said you wanted to major in biology. It would be better to just apply to Wharton directly, rather than trying to transfer because the admission officer might not believe your application and reject you.