Joyce wrote in a letter to his English publisher that his "intention was to write a chapter of the moral history of my country and I chose Dublin for the scene." To go one step beyond this, we can say that Joyce didn't just choose the city, he chose the people of that city in order to tell his "moral history."
Since the people of Dublin are "Dubliners," and it's their thoughts, feelings, hopes, dreams, and yes—failings that give unity to the collection, it makes sense that Joyce would call it Dubliners. Simple, right?
But there's also a deeper point here. It's sometimes possible to interpret characters based on their childhoods, or their religious beliefs, or the way that their actions seem to affect other people. But Joyce, by giving this title to the book, suggests that we always remember that these people are defined by their geography—the place where they live—more than anything. If we ask ourselves why a character is like she is, or why she does things so strangely, there's one answer to that question that's always right: "because she lives in Dublin."