Hi Meghana,
You will need a Linux EC2 because you can't install docker on a VM.
The sizing will depend on the number of developers working on this instance, but the minimum is 4 CPUs and 16GB RAM.
In the multiple developers scenario, each developer will need a Docker container with their workspace. Assuming that each container can consume a minimum of 8 GB RAM (it's more when publishing an app), you can add CPU and memory accordingly.