Curious passers-by watched attentively as a cosmetology student clipped and styled the tousled hair of a young woman, arched her eyebrows, shaded her eyelids blue, reshaped her cheek with a rosy blush and applied bright red lipstick, transforming a plain working woman into a beauty during a recent lunch hour.

The demonstration took place in the front window of Scanners, downtown's first beauty school and one of a handful of black-owned businesses in the heart of the city's commercial district.

Liz Nolan, 41, who owns Natural Motion, a successful chain of beauty salons, opened the combination beauty school and cosmetics store nine months ago. Formally called Scanners International Beauty Academy, it is at 1615 K St. NW, amid high-rise buildings whose tenants are mostly lawyers, accountants and national associations.

"Being a hairdresser for 22 years, I see blacks have never been affiliated with business people and I wanted to bring them my students into an area where they deal with business people," said Nolan, explaining her choice of the downtown location. "I wanted to bring them into a world where they would be able to deal with the business people."

She added, "It's working beautifully. I can hardly sleep at night. I like it so much I just might buy this building. I should have been downtown here 15 years ago."

Later she said, "I'm just a black owner sitting in the midst of the goodies."

The school has what Nolan calls a "rainbow coalition" of staff, students and clients. Students of all races learn to handle all kinds of hair, which accounts for the school's interracial clientele.

It is doubtful that Nolan could have realized her goal much more than a decade ago. Even today, in a city that is 70 percent black, Nolan joins only a handful of other black entrepreneurs who own businesses downtown.

The shop is located west of 15th Street, the unofficial boundary line between old downtown and new downtown. Old downtown, once the city's primary shopping area, is well populated with blacks, who work in the surrounding federal and city government buildings and others who simply come to shop.

New downtown, centered on Connecticut and K streets NW, is characterized by privately owned office buildings housing law firms, accounting companies and national associations, where blacks hold few management positions and more often work as secretaries or in clerical positions.

Scanners is a world of elegance and high fashion on two floors connected by a carpeted staircase. On the upper level, lunch-hour browsers can sample "Liz Nolan" moisturizing foundations, silky face powders, ruddy blushes and shimmering lipsticks in a room partially lined with mirrors and furnished with display counters.

Downstairs a sign prominently posted on a deep coral-colored wall notifies clients that all work is "done by students only, under expert supervision."

Because students do the work, the cost of a hairstyle or manicure is about a third of what is charged in Nolan's three other salons, she said. But what patrons save in money, they might lose in time.

"We do not rush," said Nolan. "Each student must be tutored, so sometimes it takes an hour and a half, whereas in a salon it could take 45 minutes."

The novice hairstylists, like the clerks upstairs, are dressed in the school's uniform of hip-hugging black sleeveless T-shirt with the Scanners logo. The shirt is worn with pants or closely fitting straight skirts. The color scheme must always be black and white, Nolan said.

The spacious salon room with its 30 styling stations, arrow-straight rows of shampoo chairs, plastic sinks and hair driers bustles with activity. Twenty folding chairs and a blackboard constitute a makeshift classroom in the center.

Near the entrance are displayed nine large trophies won by the students in hairstyling competitions.

"I came to this school because it's Liz's school and I knew it would be the best one," said Ritchie Foster, 23, who won three of the trophies.

At another station, Lesley Isaac, 24, trimmed and relaxed the "curl pattern" in the hair of Dr. Kenneth Smothers, a psychiatrist with offices on Connecticut Avenue. Henry Parker, 37, one of five instructors, closely supervised every snip of the scissors while other students watched.

Smothers, who was at Scanners for the first time, said he had no reservations about students working on his hair. "I know Liz has expert instructors . . . so I know I will get a professional job," he said.

Another customer, Judith M. Keane, 45, a management consultant who had her nails polished the color of "pecan pie," said the work was "excellent."

Nolan's 84 students range in age from 16 to 35. The cost of the 10-month cosmetology course is $3,400 for tuition plus $450 for fees and supplies. On completion of 1,500 hours, students take the city-administered certification exam to become licensed operators.

The first class, consisting of 17 students, is scheduled to graduate in October. "They are prepared to start making money the first day out of school," Nolan said.