When should I add convexity to a duration price-change estimate?

Add convexity when the prompt gives convexity and asks for a better price-change estimate, or when the yield change is large enough that a straight-line duration approximation is likely too rough.

The structure is:

Estimated percentage price change = -modified duration x change in yield + 0.5 x convexity x (change in yield)^2

For a positively convex bond, the convexity term is positive whether yields rise or fall because the yield change is squared. That means convexity improves the estimate in both directions: it softens the estimated loss when yields rise and increases the estimated gain when yields fall.