The price elasticity of demand formula is given by:

Elasticity = (% Change in Quantity Demanded) / (% Change in Price)

We are given that the price elasticity of demand for new cars is 1.25. This means that if the price of new cars decreases by 1%, the quantity demanded will increase by 1.25%.

We are also given that the supply of new cars increases by 10%. This means that the quantity supplied will increase by 10% if the price decreases.

Since the quantity demanded and quantity supplied are equal at equilibrium, we can say that the quantity demanded will increase by 10% if the price decreases by 10%.

Therefore, the correct answer is c) 10 percent.