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I have a question about adjusting the temperature when AC is on. If we set the temperature say at 23 degrees centigrade, will the ac be running till temperature reaches 23 and then will shut down and will restart when temperature goes above 23 and this keeps on repeating or it is just mixing of cold ac air with enough air at ambient temperature so that air coming out from vents is at 23 degrees? or in other words, keeping the temperature at Lo will cause more gas consumption than keeping the temperature around 23 degrees centigrade? thanks

 
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Think of the ac system as a completely independent system.
The system WILL ALWAYS try to make the evaporator core temp stay just a couple degrees above freezing, and will cycle the compressor off and on to maintain the core temp usually within a range of a couple degrees.
Example, general theory:
0*C= freezing, You can't have the core at freezing or below, else it would become a huge ice cube and block off the air flow.
+2*C lowest desired core temp and compressor turn-off point
+3*C compressor clutch turn-on point
(note I did not look up the actual numbers, this is just general theory)

Compressor cycles off and on as needed to maintain the core temp at +2-+3*C, regardless of what temperature the driver selected on the dash controls.
(some newer cars may be able to use slightly higher ranges with use of ECON mode, but not all)

The HVAC or climate control system will control the vent air temperature via airflow thorough the heater core, it adjusts the position of the blend or air mix door inside the hvac box in the dash as needed..

 
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So which is more fuel saving, keeping temperature at low and keep on turning ac on and off as needed or keep temperature little higher and let ac run continuously.

 
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In my own cars i tend to leave the temp set as cold as it will go.
I adjust fan speed and vent/floor positions to my comfort.