Before Android L update my mobile(Nexus 5) used to use around 1GB RAM.
Now, it's using around 1.6GB RAM leaving me only 250MB free memory. When I look into device memory, it's showing System is using around 1GB RAM.
Is it normal for Android 5 to use 1GB for System and why is that? If not, what wrong with my device? I updated my device using factory image from android download page.
Android, just like Linux variants, use as much memory as they think they need for optimal operation. Because of this, more stuff may be preloaded, so apps load faster or the interface is more fluent. So, if your memory is almost full, that doesn't neccesarily mean that you don't have any memory left.
On the other hand, Android L uses a lot of animations, so I can imagine it using more memory than before. Nothing to worry about however.
No. This is an unusual problem that started with the L update itself.
My N5 shows 80% RAM usage almost the whole day even when no background operations run. Mine is unrooted and I used the OTA update.
Nothing unusual. You may resort to Kit Kat while Google plans to launch a fix for it all..
ramtag to your question; in its tag-wiki you will find the right pointers: Are there guidelines on how much free RAM a phone should have? and 0 ram free on ICS already hold good answers to your question: It might well be Lollipop just makes better use of your RAM :) (proverb: "Unused RAM is a wasted resource")