Why does the terminal say java doesn't exist?





/usr/bin/java is a symbolic link to whichever is the current system version of java. The error indicates that the link is currently pointing to a file that no longer exists. (Use ls -al /usr/bin/java to see which).
You need to run sudo update-alternatives --config java and select Oracle Java 7 as the desired version, and it should correct all the java related links for you. I would have expected the installation process for this java package to have done this, but evidently something went wrong.