This article is from the MPEG FAQ, by Frank Gadegast phade@cs.tu-berlin.de with numerous contributions by others.
Good Question. Of course, it depends on all your requirements. But as a
first approach, you should consider the available bitrate of your
application as the Layers have been designed to support certain areas of
bitrates most effectively. Roughly, today you can achieve a data reduction
of around
1:4 with Layer-1 (or 192 kbps per audio channel),
1:6..8 with Layer-2 (or 128..96 kbps per audio channel), and
1:10..12 with Layer-3, (or 64..56 kbps per audio channel),
and still the reconstructed audio signal will maintain a "CD-like" sound
quality. This may be used as a first "thumb rule" - let's talk about details
later on.
 
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