D. 3 units towards East
Initially, the person displaces 10 units towards the North. This means that their starting point is 10 units North of their reference point. After the second displacement, the person is 7 units towards the North. This means that their final position is 7 units North of their reference point.
If the person moved 3 units towards the East, their final position would be 10 units North and 3 units East of their reference point, which is consistent with the given information.
Therefore, the correct answer is D. 3 units towards East.