I have been asked to prove that $\lim\limits_{n\to\infty}y_{n}=\frac{1}{x}$ if $ y_{n}=y_{n-1}(2-xy_{n-1}), y_{i}>0,(i\in \mathbb{N}),x>0.$
In particular, what I would like to know is if it is possible to prove this by using the inequality between arithmetic and geometric means?

If there is any limit at all, then the limit of $y_n$ is the same as the limit of $y_{n-1}$ so the equation $y=y(2-xy)$ immediately implies that $0$ or $\frac{1}{x}$ are the only possibilities. The first case, $0$, can be excluded because $y_n$ is growing whenever $y_n<\frac{1}{x}$.
But the limit may not exists if $x$ is large, for example. Think of $y_1=1$ and $x=10$, the sequence then diverges very quickly. The usual way of proving convergence for some $x$ is to show that the map $u\mapsto u(2-xu)$ is a contraction on suitable subset of $\Bbb R$, for example. (This is indeed the case for $x$ smaller than $2/y_1$.)