I wanted to learn did God know that Iblees would react the way he did when Adam was created? If yes then to what extent is he allowed to spread evil? And why are we humans held responsible for that? When Adam was created he had no concept of good or bad. Where did these come from?
According to the Islamic faith God knows everything. He knew everything from the beginning and nothing can add to His knowledge. When He asked Iblis to prostrate before Adam or when He put Adam in the garden He knew how each would react. He did so for the training and knowledge of the humans. This forms part of human test and trial during this worldly life. Satan is given freedom to entice humans who have to resist his whispers and follow the path of virtue and righteousness. Adam and Eve and all the humans are given necessary knowledge of good and bad to decide, judge and adopt the right course. This knowledge of good and evil is ingrained in human nature (fitrah).