Is a chilli of small size more pungent than chilli of large size of same plant if so then why? If a small chilli is more pungent then why aren't chillies in market small?
From my experience the size of chili peppers is not related to the pungency. Some time ago I grew all my chilies at home and while some were hotter than others it had nothing to do with their size.
But there might be varieties where that is true.
Some kinds of chili peppers start out hot, get mild after some time and then again become hot. So if you compare ones not fully grown to others in their mild stage it might explain differences in heat.
One variety I grew a lot started green (hot), then turned a dark violet (mild) to turn red (very hot) when ripe. But peppers of different sizes at the same stage of ripeness had similar pungency.
Chile peppers differ in flavor, not just heat level. Also, using a bigger, milder pepper will allow using more of the flavor without getting the dish spicier than wanted.
Also, using a very hot pepper for a comparatively mild dish is more difficult: The peppers need to be cut (or otherwise processed) finer, you might need to cook them longer to even out the heat throughout the dish, and handling can become tricky.
Also, a milder pepper can be better if a lot of red coloring effect is wanted without making the dish very hot.
Also, in some cases there are culinary reasons to have a large pepper, for example to make stuffed peppers.
Example: The "standard" fresh chile pepper to be found at asian grocers around here (this observation might be regional!) is some variety of thai birds eye pepper (~100000 scoville. Devilish for many americans :) ) - if someone used this in a typical american cuisine dish, even keeping the quantity used small, you would likely end up with very little chile pepper flavor and an unpleasant kind of spicyness, and burning hands if you are unaware you need hand protection if not used to handling these...
Also, fresh peppers will have grown more the later they are harvested, so there will be agricultural and logistic reasons not to sell exactly one certain size.