Preheat the oven to 350°F and line a muffin tin with four paper liners.

In a medium bowl, cream together the granulated sugar and 3 tablespoons softened butter until light. Add the egg, milk, and vanilla extract, then stir until combined.

In a separate bowl, whisk ¾ cup flour with the baking powder. Add the dry mixture to the wet ingredients and stir just until smooth. Fold in the diced apples.

Spoon the batter evenly into the prepared liners, filling each about two-thirds full.

To make the streusel, combine the brown sugar, 2 tablespoons flour, 1 tablespoon butter, and cinnamon in a small bowl. Rub the mixture with your fingers until it forms coarse crumbs. Sprinkle the streusel over each cupcake.

Bake for 18 to 20 minutes, until a toothpick inserted in the center comes out clean. Let the cupcakes cool in the tin for 5 minutes, then transfer to a wire rack.

Once cooled, drizzle each cupcake with caramel sauce.