This law is based upon two important facts. Firstly, while the total wants of a man are virtually unlimited, each single want is satiable. Therefore, as an individual consumes more and more units of a good, intensity of his want for the good goes on falling and a point is reached where the individual no longer wants any more units of the good.
That is when saturation point is reached; marginal utility of a good becomes zero. The second fact on which the law of diminishing marginal utility is based is that the different goods are not perfect substitutes for each other in the satisfaction of various particular wants.
It is obvious from above that the law of diminishing marginal utility describes a familiar and fundamental tendency of human nature. This law has been arrived at by introspection and by observing how people behave.