why are diverstiy and identity confused according to hume?

Answer 1

In A Treatise of Human Nature, Hume points out that we typically think we are continuously aware of something we call our “self”, but when we look to our experience, there is nothing to substantiate this belief. “When I enter most intimately into what I call myself, I always stumble on some particular perception or other, of heat or cold, light or shade, love or hatred, pain or pleasure. I never catch myself at any time without a perception, and never can observe any thing but the perception.” So, instead of an identity, Hume finds diversity.
We often claim that an object at one time is identical with an object at another time, when in fact the two are just a succession of different objects. This is exactly what we do, according to Hume, when we think of the “self”. But what is it that induces us to mistakenly attribute identity to something while, being a succession of objects, it is really an instance of diversity? Hume says the answer must lie in the workings of the imagination. “The passage of thought from the object before the change to the object after it, is so smooth and easy, that we scarce perceive the transition, and are apt to imagine, that ‘tis nothing but a continu’d survey of the same object”. This is especially true when the changes are relatively small or when they occur very gradually.

So the bottom-line answer to your question is “imagination” which blurs together a lot of small or gradual changes and gives us the impression of a substantial object persisting over time.

Answer 2

Because both define each other. There would be no identity if there isn't diversity. There would be no diversity without individual identities.