$$\textbf{Hint: Product of slopes of two perpendicular lines is -1.}$$
$$\textbf{Step 1: Find the equation of two lines.}$$
$$\text{Using two points form, equation of line L is given by,}$$
$$\Rightarrow y-0=\dfrac{0-1}{2-1}(x-2)$$
$$\Rightarrow y=-(x-2)$$
$$\Rightarrow x+y=2.......(1)$$
$$\text{Slope of L = - 1}$$
$$\text{L and }$$ $$\text{L' are perpendicular to each other}$$
$$\text{Slope of L' =}$$ $$\dfrac{-1}{-1}=1$$
$$\text{Using point slope form, equation of line L' is given by,}$$
$$\Rightarrow y-0=1(x-\dfrac{1}{2})$$
$$\Rightarrow 2x-2y=1 ......(2)$$
$$\textbf{Step 2: Find the required area.}$$
$$\text{Let, L and L' intersect each other at B.}$$
$$\text{Solving eq(1) and eq(2) , we get,}$$
$$\Rightarrow A(x,y)=\left(\dfrac{5}{4},\dfrac{3}{4}\right)$$
$$\text{The intersection points of lines L and L' with y-axis are B(0,2) and C}$$$$\left(0,-\dfrac{1}{2}\right)$$ $$\text{respectively.}$$
$$\text{Using distance formula,}$$
$$AB=\sqrt{\left(0-\dfrac{5}{4}\right)^2+\left(2-\dfrac{3}{4}\right)^2}=\dfrac{5}{4}\sqrt2$$
$$\text{And,}$$
$$AC=\sqrt{\left(\dfrac{5}{4}-0\right)^2+\left(\dfrac{3}{4}+\dfrac{1}{2}\right)^2}=\dfrac{5}{4}\sqrt2$$
$$\text{Area of the triangle}$$ $$=\dfrac{1}{2}\times AB\times AC=\dfrac{1}{2}\times\dfrac{5}{4}\sqrt2\times\dfrac{5}{4}\sqrt2\ sq.unit $$
$$=\dfrac{25}{16}\ sq.unit$$
$$\textbf{Hence, the correct option is D.}$$