The purpose of this paper is to determine, for a country producing two goods with two factors, how the shape of the transformation curve depends on the elasticities of substitution in production in the two industries. Harry Johnson' has examined the shape of the transformation curve and has concluded that it is much less bowed out than is traditionally drawn. James Melvin2 notes that there are two influences on the shape of the curve, the factor intensity ratios and the elasticities of substitution, and that since Johnson used Cobb-Douglas production functions, he was restricted to only one value for the elasticities of substitution (unity). Melvin concludes that as substitution becomes more difficult, the production possibility curve becomes more bowed out. In another recent paper, Frank Hsiao3 has made the opposite claim-that the curvature of the transformation locus is decreased when the elasticity coefficients are small. We find, on the contrary, that this issue is more complicated, with the production set shrinking as the elasticities of substitution fall and the change in the curvature being indeterminate on theoretical grounds. Figure 1 depicts the familiar Edgeworth-Bowley box, where X is assumed to be the capital-intensive commodity, and both X and Y are subject to constant returns to scale. The production possibility curve can be derived on the same diagram with the Savosnick technique.4 Units of output are defined so that quantities of X and Y can be measured by the distances from their respective origins scaled on the diagonal O.QY by the isoquants X' and Y'. These measurements are projected on to the sides of the box by dropping perpendiculars AC and BD, so that OC represents Y' of Y, OD is X' of X, and Q is the point on the transformation curve corresponding to P on the contract curve. The origin for the transformation curve is 0, and all points on the frontier (except the endpoints) lie northwest of the diagonal. Suppose the elasticity of substitution, ca, decreases for both sectors.