Humidity is the amount of moisture in the air. All air holds water vapor even if it cannot be seen. Air can hold only so much water vapor; however, the warmer the air, the more moisture it can hold. When air can hold all that it can the air is "saturated" or has 100 percent relative humidity.
a. If air is cooled beyond its saturation point, the air will release its moisture in one form or another (clouds, fog, dew, rain, snow, and so on). The temperature at which this happens is called the "condensation point". The condensation point varies depending on the amount of water vapor contained in the air and the temperature of the air. If the air contains a great deal of water, condensation can occur at a temperature of 68 degrees Fahrenheit, but if the air is dry and does not hold much moisture, condensation may not form until the temperature drops to 32 degrees Fahrenheit or even below freezing.
b. The adiabatic lapse rate is the rate at which air cools as it rises or warms as it descends. This rate varies depending on the moisture content of the air. Saturated (moist) air will warm and cool approximately 3.2 degrees Fahrenheit per 1,000 feet of elevation gained or lost. Dry air will warm and cool approximately 5.5 degrees Fahrenheit per 1,000 feet of elevation gained or lost.
Continue reading here: Cloud Formation
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