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What i always thought that air conditioners blow the cool air without knowing that they actually take the warm air from indoor and from outdoor. But whats the point of taking air from indoor and outdoor, Shouldn't they just be blowing the cool air inside and out air outside? How does it really make the difference?

Also, Does all Air conditioners function the same way as in shown in this figure, even split A.Cs?

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I've run out of tags for questions :\

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Indoor air is used since the AC cannot create matter. The outside air is used to cool the hot coils that the compressed refrigerant runs through. Remember when you compress a gas it heats up. – ja72 Sep 16 '11 at 14:42

That picture shows an air conditioner which only takes air from the inside (red indoor air arrow) and cools it before pushing it back into the room. It only uses air from outside to cool the outside condenser coils. Since you are moving heat from inside the room to outside - the outside coils will get hot and so you have to cool them.

The only thing that flows between inside and outside in this diagram is the hot fluid in these coils. You could cool the outside condensor coils by having them go into the ground or a river - anything that can absorb the heat. This is actually more efficient than using air, but most houses don't have a river flowing past the window!

In reality an air conditioner like this will leave the air inside the room cooler, but stale and smelly, since it is continually reused. A real air conditioner also takes a proportion of fresh air from the outside and cools that before adding it to the inside air. Better models also have a heat exchanger so the cold stale air being sent outside will cool the fresh warm air on it's way in.

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My car, and I think most cars, have a valve so you can choose the cooled air to be mostly inside air, mostly outside air or some in-between mixture. As other answers say, inside air is more efficient, but outside air smells better (usually).

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Our traditional central A/C unit does not have the blower motor (which circulates the indoor air over the cooling coils) coupled in any way to the fan on the condenser (which circulates outdoor air over the condenser). This is similar to most split units.

Our (older) unit does not take in air from outside.

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