In the graph, P stands for price; each P (1, 2, 3) indicates an increase in price. The Y indicates year (Years 1, 2, and 3). The AD stands for aggregate (or total) demand, in this graph, there are three increases in demand: AD1, AD2, and AD3.
Notice what is happening. The total demand for goods (AD) has shifted from AD1 to AD2. This shift of total demand indicates more products are being purchased. Notice that when this happens, the initial price of the product (P1) increases to a higher price (P2). The price increases because more people want to purchase the product and the supply has not increased to meet the higher demand. Looking at the graph, can you guess why this type of inflation is called "demand-pull" inflation?