Knobgobbler, my first kind commenter, gave me the notion to elaborate on the theme, something I would've done sooner or later anyway.
Caveat: we're talking realism here. If you insist on million-person cities, Spelljammer-level ubiquity of powerful magics and all the trappings of High Fantasy, terrific ... just handwave what you want and have done with it. YMMV.
Let's say you have a respectable sized city of 10,000 people. (This really is a respectable sized city; it'd make the top five in England at most points in the medieval era.) If wizards are as common as blacksmiths, you've got about 20. Terrific, right? Plenty of enchanting muscle!
Well, now, hold on. Are all those folks practicing enchanters? Of course not. There are two major factors. For one thing, most fantasy game systems require wizards to be of a certain power level to be a successful enchanter, excluding some -- or many -- wizards from ever doing it at all.
For another, why would every wizard be a professional enchanter? Take Master Elaina, the water wizard -- sure, she’s the city’s most powerful mage, but she’s a full-time adventurer; she’s not enchanting for a living. Mistress Syrielle is a legend, but she’s mostly retired now, and spends her time puttering in her garden from her wheelchair. Master Ravenswing works for the Duke, mostly in divination; he’s not enchanting for a living. “Whisper” is the hired mage of the richest fellow in town, and they say her telepathy and anti-thief magics are why he’s so rich; she’s not enchanting for a living. Master Nightflame is the professor of thaumatology at the local academy; he’s not enchanting for a living, and neither is his sister Arathena, who got stuck with the Guildmaster job of the local wizards’ chantry after Syrielle retired. No one trusts Master Hamal any more since he fell into the bottle; he’s sure as hell not enchanting for a living. Whether anyone trusts Master Pando after the magical accident (he's yet to be able to cope with enclosed spaces, precious metals and the color red), he doesn't seem to be enchanting these days. And Master Detheril is the new Knight Marshal of the city, and on the short list for a coronet the next barony that opens up; he’s not enchanting for a living.
So you might have ten enchanters; you might have half as many. Just remember, though, if everyone else is an enchanter, you don’t have spare wizards for anything else. Need someone to cast a divination spell for you? No one available. Want a wizard to teach your party’s wizard a spell? Sure, spend three months in Nightflame’s next class (it’s about necromancy, by the way), and you can; otherwise, not. Need that magical scroll written? You’re SOL.
Well, alright, half of what’s left. Six enchanters, then. How liberal is your game’s enchanting rules? I use GURPS, myself (and let’s ignore that published material suggesting that only one wizard in ten be of a power level high enough to enchant at all, shall we?). Purify Water sounds like a good, basic spell; an item that is self-powering takes 550 mage-days to enchant. Which means that all six of those wizards, working together, can reasonably bang out an item in three months; it can purify nearly 3000 gallons of fresh water per day. In a year’s work, they can enchant enough to handle all the fresh water needs of the city for drinking. (Unfortunately, the cooking, bathing and industrial needs for fresh water are about TEN TIMES as much.)
But sure, they stick with it. Now the city has plenty of fresh water, magically created!
Fair enough. But it doesn’t have magical streetlights. It doesn’t have magical weapons. It doesn’t have magically created food. It doesn’t have anything else enchanted. And even that much rests on a few very flimsy premises:
* Every enchanter is a skilled water enchanter. Why would they be? Is every wizard you run? Mightn’t they just as likely be earth enchanters, or fire enchanters, or temporalists, or communications specialists?
* None of them have any better gigs going on than creating fresh water for the city. What happens when agents for Countess Silvermist come and ask a couple of the enchanters exactly how long they plan on playing Third String Waterboy for the Duke, when they could come work for the Countess for double the pay and their own private towers?
* As I mentioned in the pertinent GGF post, nothing ever goes wrong. The Purification items don’t get stolen and sold on the black market, the city’s enemies never decide to ruin them, the wizards never strike for more money, the city always pays on time and in full, none of the wizards ever gets sick, the Duke never concludes that the city has plenty of water already and the money’s better spent refitting his cavalry troop after they got pasted in the last battle, the fire that torched a fifth of the city miraculously missed the Water Works, or the Duke’s never an egotistical snot pissed off that Countess Silvermist’s water purification items are made of gold, so his ought to be too, ditch the old ivory ones?
So sure; there are some ways wizards can have a material impact on life in a city. If your system has a Predict Weather spell, one forecasting mage can save the lives of a lot of fishermen. One wizard with long distance telepathy ... well, we know what instant communications can do. A battery of wizards, as a long term civic project, well funded, might be able to implement ONE change - pure water, magical street lights - as long as that change is simple, and nothing goes wrong.
So do the math for your own systems. How many people get to be journeyman wizards? How many wizards are capable of enchanting? How many wizards do you want to task to do other things: battlemages, teachers, researchers, detectives, adventurers, court wizards, mages-for-hire and fussy old coots who just want to putter in their gardens and not be bothered. Does your magic system encourage/require specialization? How long does enchanting take? Can just anyone use an enchanted item? Can an item work without supervision? How fragile are magical items?
This is why you don’t have “magical” economies.