Built-in AVD Manager incorrectly generates (internal storage) disk images when you're creating new virtual device targeting API 19 or greater.
On API 19 - no matter what size you specify during the virtual device configuration, the maximum that you're going to get is 200mb. On API 21 and 22, the maximum size increased to 550mb. This issue already has appropriate question on StackOverflow and AOSP bug report.
For average application this will be sufficient, but for large application (or when you need to install several application that talk to each other) it can be problematic.