Even though you are most likely dealing with 'puppy mange', make sure to check the link at the bottom for other possibilities.
I will address mange here since there are many misconceptions about this skin issue which sadly cause unnecessary confusion and grief.
Puppies have a high propensity to be afflicted with demodectic mange due to their immature immune system. Demodectic mange is caused by demodex mites which are actually present in most dogs and under normal conditions cause no harm. Puppies get the mites when in close contact with the mother while nursing but if the mite population can't be controlled by their still immature immune system, they develop mange.
In most cases, the mange condition will disappear when the pup's immune system develops and can keep the mites in check. If you wish to banish this condition sooner, you must be extremely careful as to how you treat it and there are safe and affordable ways to cure it.
As you may already know and for the benefit of those who read this post and are not familiar with this problem, mange is a skin condition caused by tiny mites that you can't see with the naked eye. There are three types of mites that attack dogs most often: demodectic (not contagious and may itch or not), sarcoptic (very contagious and extremely itchy) and cheyletiella (contagious and mildly itchy).
The typical symptoms as the mange condition progresses include hair loss and scaly or crusty skin. If the condition causes itchiness, scratching opens the door to secondary skin infections (bacterial or fungal) that may cause an unpleasant odor. Unfortunately (except in the case of demodectic mange on puppies with immature immune systems), mange does not go away on its own and the lesions continue to spread so it should be treated as soon as possible.
The most common type of mange today is demodectic mange (not contagious type) which is triggered by a weak or compromised immune system due mainly to factors such as immaturity (as in the case of puppies), improper nutrition (commercial food being the main culprit), stress and advanced age.
Vets can do a deep skin scraping and check the sample under a microscope to detect the presence and type of mite. However, everyone should be aware that there are some very serious problems caused by the use of the most common prescribed treatments and there are safe and affordable alternative treatments to cure any type.
Regardless of the type of mange, in order to cure it you need to treat with a medication that kills the mites. The mange medications most often prescribed by vets contain pesticides and other toxic chemicals that are detrimental to your dog's health with resulting health issues that you will have to face sooner or later. These medications include Ivermectin (also known as Ivomec) and Amitraz (also known as Mitaban). See the links that follow for toxicology information. It is always advisable to check the veterinary drug database for the side effects of any medication prescribed by your vet
http://www.drugs.com/vet/
Thankfully, there are a number of effective alternative treatments out there that are safe and natural at a reasonable cost that will kill the mites. You can easily do some research in the Internet to find out about these and compare your options.
I prefer the 'spray type' because it is inexpensive, very effective, convenient to use (no mixing and no mess), and it is natural and harmless to pets and humans.
Hope this helps.
Toxicity:
http://www.ncbi.nlm.nih.gov/pubmed/18627233
http://www.petmd.com/dog/conditions/toxicity/c_dg_ivermectin_toxicity\
http://www.drugs.com/sfx/ivermectin-side-effects.html
http://www.drugs.com/vet/mitaban.html
http://www.peteducation.com/article.cfm?c=2+1677&aid=2245
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1481314/?page=1
http://www.petmanage.com/dog-health/what-is-amitraz-toxicity.html
Mange spray:
http://www.florapetnaturals.com/online-store.html
There are other skin issues you need to consider. For details see answer :
http://answers.yahoo.com/question/index;_ylt=AmNHNKCYzFGJ5CYRKOfjFdDsy6IX;_ylv=3?qid=20130814125751AA190yC