I just updated Android SDK to version 21 and trying to start emulator. I am using Nexus 4 with CPU Intel atom (x86) 768 RAM and 524 internal storage. Emulator starts fine but it
emulator -avd "Name" -partition-size 500
This solved the issue for me.
Update on how to execute above command:
cd [android SDK directory]/tools/
./emulator -avd nameOfAvd -partition-size 500 &
emulator -avd nameOfAvd -partition-size 500