Here is the issue with demodectic mange. In fact, MOST OF THE TIME it will clear up on its own with puppies. If you have a dog from a responsible breeder, please ask before you treat. NOT treating, in order to determine if it is simply an immature immune system OR becomes generalized, is very important for the breeder to know. Dogs that have had generalized demo should not usually be bred and the rest of the litter/parents and relatives should be observed. Dealing with Chows, where it is a major issue, I have sadly a lot of experience. But with localized demo mange in puppies, close to 90 percent clears up on its own.
http://www.marvistavet.com/html/demodectic_mange.html
and from Dr. Mike:
Localized demodectic mange is thought to occur due to transient stress or a decrease in local immune function at the affected sites. Generalized demodectic mange is thought to be due to a specific deficiency in T-cells that suppress these mites. This is thought to be a hereditary condition but if the exact mechanism by which inheritance occurs is known, I am not aware of it.
The best way to tell if the condition is severe enough to warrant the assumption that it can be passed on to future generations is to wait and see if it clears up on its own. For this reason, we try not to treat demodectic mange until it is evident that it will not get better on its own. At least 80% of dogs will outgrow this condition.
Read more: Mange Mites - Demodex - VetInfo
That said, I do hope your vet has seen the dog as only a scraping and exam can be sure what it is. In case of something contagious, bacterial, etc, you risk it getting much worse.