Final answer:
The words 'I', 'Detroit', and 'Michigan' should be capitalized in the sentence, resulting in the correct form: 'I live in Detroit, Michigan.' Proper nouns and the first word of a sentence must always be capitalized according to standard English grammar rules.
Step-by-step explanation:
The words that should be capitalized in the sentence are 'I', 'Detroit', and 'Michigan'. When writing this sentence correctly with proper punctuation, you should also ensure that the sentence starts with a capital letter, and it ends with a period. The correct sentence is: I live in Detroit, Michigan. In this correction: It is essential to always capitalize proper nouns and the first word of a sentence to follow standard English grammar rules.