Android Studio can run on whatever it needs, but the error seems to be pointing to the SDK that the project is using. To check what your project is using, go into Project Structure > Project Settings > Project. You should now see the Project SDK. It should say something like "Android API ## Platform (java version "1.7.[current version number]"). If it doesn't say 1.7.[current version number], then it probably needs to be updated.
Here's what you can do to update it:
- In Project Structure > Platform Settings > SDKs, click the "+" button to add a new SDK.
- In the pop-up, go into your Android SDK folder and click "Choose"
- Another pop-up will appear asking for which SDK and JDK you want to use. Choose any Android SDK and the 1.7 JDK.
- Go to Project Structure > Project Settings > Project and change your Project SDK to the one you just created. You should see the name of the SDK with the new Java version that you installed.